The chancellor is being warned “taxed to death retailers” have hit a tipping point with any further increases putting shops at risk of closure.

The stark warning comes in advance of next week’s Budget, when George Osborne is expected to report on reforms of the controversial business rates system after a long-awaited overhaul was pushed back.

However, some fear the government will present a “watered down” review with a focus on devolving responsibility to local authorities instead of reducing the burden on retailers.

Business rates expert Paul Turner-Mitchell warned retailers could face a 20% business rate increase in April as they lose their retail rate relief.

“Retailers are already struggling and the withdrawal of the relief, plus an inflationary increase, is going to mean a 20% increase in business rates, which is ridiculous,” he said. “The rate relief is enjoyed by 278,000 small shops at the moment. That’s over £400m. The extra burden is getting to a stage that is unsustainable; it’s reached a tipping point. Small shops are the heartbeat of communities and all the government is doing is taxing them to death.”

I want the chancellor to provide some stability for shopkeepers by scrapping the tobacco tax escalator

NFRN chief executive Paul Baxter said: “Business rates are already high, plus retailers face the National Living Wage and margins being squeezed by suppliers who are passing this cost on.

“By adding to this, all they will do is put more people out of work and cause more shops to shut.”

Meanwhile, the Tobacco Retailers’ Alliance is calling for the tobacco tax escalator to be scrapped.

Suleman Khonat, Blackburn retailer and spokesman for the alliance, said: “I want the chancellor to provide some stability for shopkeepers by scrapping the tobacco tax escalator. This way, the government will be able to get to grips with the illegal tobacco market as opposed to offering more rewards for those willing to break the law.” 

Bill Esterson MP, shadow minister for business, innovation and skills, said more action is needed from the government to help smaller shops. “The government has been promising a review of business rates for the last five years,” he said. “It has a role to support small business.”