LONDON BRIEFING: As Christmas gets later and later on the high street, the January sales get earlier

EVEN AS the traditional last-minute rush to the shops gets under way today, there is little doubt that the retail sector has suffered a nightmare Christmas.

For many, it is too late now to turn things round and they are desperately pinning their hopes on the January sales. As Christmas gets later and later on the high street each year, so the January sales get earlier - DIY group BQ started its sale first thing today, as did rival Homebase.

Department stores group John Lewis has stolen a march on its rivals by launching its online sale on Christmas Eve for the first time - it will be taking orders from 6pm tonight, beating Marks Spencer by six hours.

Scores of other retailers are going on full sale on Christmas Day, with Debenhams, which has already slashed its prices by 50 per cent, launching its "biggest ever" sale with discounts of up to 70 per cent.

Shopping online has become an increasingly popular pastime on Christmas Day, according to IMRG, the online retail industry organisation. It expects more than five million people in Britain to log on in search bargains tomorrow, spending about £100 million in total. Online shoppers spent £84 million on Christmas Day last year - many were redeeming vouchers and spending cash they had received as presents, with the most popular sites proving to be Amazon, Argos, Play.com and Apple iTunes.

The online retail site eBay also did a roaring trade, as unwanted presents were put up for auction. The peak for unwanted gifts tends to be a couple of days later - eBay estimates that some two million gifts were listed for sale on December 27th last year.

John Lewis goes into its "January" sale this evening in a stronger position than most of its rivals. It has kept its nerve and steered clear of the "one-day spectaculars" launched elsewhere on the high street (or, in the case of Debenhams, a five-day spectacular, and a full 10 days at the ailing BHS chain).

These so-called guerrilla sales have become an increasingly common feature of festive trading and are largely responsible for pushing the Christmas rush later and later each year. Canny shoppers have realised that if they sit it out, they will eventually be rewarded with lower prices.

While one-off sales stir up some excitement and can be successful in bringing in shoppers, they do not always generate enough in extra sales to make up for the hit on margins. And they can irritate customers - anyone who had bought at full price the day before would be furious at missing out on the discount.

When Marks Spencer held its two pre-Christmas sale days, offering 20 per cent reductions, many shoppers simply bought the same item again, returning later to claim a refund on the earlier full-price purchase.

The cat-and-mouse game between retailer and customer has been going on for years, but recession has taken it into a dangerous new phase: prices are being slashed, but customers, spooked by falling house prices and fearful of losing their jobs, are still refusing to spend.

And when they do spend, they have come to expect hefty discounts as a right rather than a one-off. As the recession deepens, and consumers have no choice but to embrace the "new age of austerity", it will be increasingly difficult for the store chains to return to a normal pricing structure.

Deals cancelled in record numbers

PRICING STRUCTURES have gone out of the window in the investment banking world too, where deals were cancelled in record numbers last year amid the market mayhem.

The largest deal to bite the dust was the near-$150 billion takeover of Rio Tinto by fellow mining giant BHP Billiton, but hundreds of others also failed. Figures from research firm Dealogic show the tally of global mergers and acquisitions in 2008 collapsed by 29 per cent, to $3.3 billion. More than 1,300 transactions, worth $911 billion, were pulled as finance dried up and buyers took fright.

The knock-on effect saw advisory fees earned by the investment banking industry fall to less than $20 billion, down from more than $28 billion the year before.

Prospects for 2009 look equally bleak, piling on the pressure for the investment banking industry that has already shed thousands of jobs.

There will still be work for investment bankers in 2009, although it will not be so lucrative: instead of facilitating ambitious bull market acquisitions, they are likely to spend much of their time acting for distressed sellers.

• Fiona Walsh writes for theGuardian newspaper in London