The British Retail Consortium (BRC) is calling for action to prevent "paralysis" in retail spending, as conditions for traders remain tough.
Data for July shows that retail sales rose 0.6 per cent on a like-for-like basis compared to the same month last year. On a total basis, sales were up 2.5 per cent.
Director general Stephen Robertson said the figures show a "modest" improvement on recent months, but insisted that overall the retail environment is very difficult.
"When you take into consideration inflation and January's increase in VAT, 2.5 per cent growth effectively means people are buying fewer goods," he remarked.
"Food sales continue to outperform non-food with inflation helping to drive top-line growth. But shoppers were only tempted into stores by an unprecedented number of promotions, which come at the expense of margins."
Mr Robertson said growing fears over the sovereign debt crisis and a slowdown in the global economy have impacted negatively on people's sentiment.
"Business and consumer confidence needs to be restored quickly before spending paralysis sets in," he stressed.
The BRC's warning comes as retailers are face widespread riots and looting across London and other regional cities.
Some stores have suffered break-ins, burglary and extensive damage to their premises, while others have seen their businesses burnt to the ground.
The BRC is calling for immediate support from the government to help shopkeepers protect their properties, including practical assistance to help clear up after the attacks.
"As well as the immediate bills caused by damage and theft, there will be longer-term costs," said Mr Robertson. "Inevitably some businesses which have been attacked will never open their doors again."
Faced with such a challenging retail environment, it is possible that the number of traders making use of business recovery services in the months ahead.