Households risk a fresh surge in shop prices unless Rachel Reeves provides businesses with a £1.8bn tax break, retail bosses have warned. 

Shoppers are benefitting from some lower prices, offering relief from the cost of living crisis, but Helen Dickinson, chief executive of the British Retail Consortium, said the threat of mounting tax puts this at risk.

She said: “Households will welcome the continued easing of price inflation, but this downward trajectory is vulnerable to ongoing geopolitical tensions, the impact of climate change on food supplies, and costs from planned and trailed Government regulation.

“Retail is already paying more than its fair share of taxes compared to other industries. The Chancellor using tomorrow’s Budget to introduce a Retail Rates Corrector, a 20pc downwards adjustment, to the business rates bills of all retail properties will allow retailers to continue to offer the best possible prices to customers while also opening shops, protecting jobs and unlocking investment.”

The retail, leisure and hospitality industries currently benefit from a tax break worth up to 75pc of their business rates bill.

Much of the £2.4bn benefit goes to smaller companies as the amount of relief is capped at £110,000 per business.

The tax break is set to expire in the spring, so the BRC wants a permanent replacement to the scheme in the form of a lowering of rates across the board.

Businesses also face the prospect of a higher tax charge on their wage bill if Ms Reeves increases employers’ national insurance in Wednesday’s Budget. The BRC estimates that every extra percentage point on the tax, which is currently levied at 13.8pc, costs retailers another £500m.

On top of that comes the proposed changes to workers’ rights, which will further add to the costs of running a labour-intensive business such as retail.

A Treasury spokesman said: “We do not comment on speculation around tax changes outside of fiscal events.”

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