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LONDON, Dec 17 (Reuters) - British retail sales fell at their fastest annual pace in at least a quarter of a century in early December as the key Christmas season got off to a dismal start, a survey indicated on Wednesday.
The Confederation of British Industry's distributive trades survey balance fell to -55, the lowest since the series began in 1983, from -46 in November. Analysts had predicted a reading of -41.
"The survey suggests that the huge price cuts seen on the high street have failed to tempt cash-strapped shoppers to part with their cash," said Vicky Redwood, UK economist at Capital Economics.
Retailers were also very gloomy about the outlook for next month, with the expectations balance for January at -49, also a survey low, despite a sharp reduction in interest rates and government measures to boost the economy.
"We've already seen many stores bringing forward their sales and discounting goods deeply in order to entice customers into the shops. But with shoppers continuing to watch their pennies," said Andy Clarke, chairman of the CBI's survey panel.
"It is still too early to say whether the recent cuts in interest rates and VAT will help lift consumer spending.
The Bank of England has cut interest rates by three percentage points since October, bringing them down to 2 percent, their lowest level since the early 1950s.
The government cut value added tax from 17.5 percent to 15 percent at the start of December. The CBI survey was conducted between November 28 and December 10.
The year-long credit squeeze has already claimed high-profile victims such as furniture chain MFI and DVDs-to-sweets group Woolworths. Analysts expect creditors to get even tougher with retailers once the Christmas shopping season has past.
"Retailers are not going bust because their suppliers are failing to get insurance, and that's only going to increase from here," said Richard Perks, director of retail research at Mintel.
"We could see more failures than the last recession," he added.
(Reporting by Fiona Shaikh; Editing by Ron Askew)