Christmas sales most lacklustre since 1979

After the most disappointing December trading for 25 years, British retailers are now bracing themselves for a new wave of card fraud.

After the most disappointing December trading for 25 years, British retailers are now bracing themselves for a new wave of card fraud.

The British Retail Consortium is expected to report that shops experienced, on average, a fall in like-for-like December sales of up to 2 per cent last month compared with 2003. City analysts said that even last week's sales business would not make up for dismal pre-Christmas trading.

The news comes as banks and retailers prepare to face a massive increase in hi-tech crime, including identity theft and online fraud, following yesterday's introduction of new super-secure credit and debit cards.

Police and security experts believe that chip-and-PIN cards, which require customers to tap in their secret personal identity number rather than signing their name, will deprive organised criminal gangs of around £241m a year and that they will look for other ways to make up the loss. Plastic last week overtook cash as Britain's preferred method of payment.

Yesterday marked a major change in retailing, with banks no longer covering losses from card fraud unless shops have upgraded to chip and PIN. Customers without a chip-and-PIN card will still be able to sign for goods.

Identity theft - where a criminal uses stolen bank account details to order new credit cards or empty a victim's bank account - increased by 66 per cent to £37m last year. Cash machine fraud - where illegal "skimming" devices are used to read card details - was up 85 per cent to £61m. Mail order fraud, with details taken by telephone, was up by 51 per cent, also to £61m. Mail order and internet retail are thought particularly vulnerable because the cardholder need not be present for the transaction.

"The other new burgeoning fraud is online banking fraud," said Jemma Smith, of payments association Apacs. "Phishing" scams, in which customers are sent emails purportedly from their bank asking for account details, first emerged in 2002 and cost £4.5m a year. In other countries money has been transferred out of accounts.

Retailers will gather in London next month for a conference on tackling retail fraud and "fraud migration". Organiser Paul Bessant said that when chip and PIN was introduced in France, card fraud fell by 80 per cent.

The police's Dedicated Cheque and Plastic Crime Unit, funded by the big banks to the tune of £3m, has recovered 35,000 stolen credit cards since 2002.