The British Retail Consortium has warned the Chancellor that his pre-budget report is a threat to consumer confidence and the retail sector's ability to maintain its position as the main driver of UK economic growth.
It is feared that consumer spending could fall dramatically if the Chancellor's need to borrow heavily in the face of falling tax revenues result in an increase in interest rates.
During 2002 the UK economy has depended on the retail sector as the key driver of stable growth – creating more than 91,500 new jobs and keeping prices in shops below those of 1997.
Bill Moyes, director general of the BRC, said: 'The Chancellor's key objectives should be maintaining consumer confidence and reducing business costs. The Chancellor's pre-budget report threatens consumer confidence and has increased indirect taxation at a time when business costs are rising and margins are under pressure.
'The retail industry is faced by apparently endless increases in costs generated by Whitehall and Brussels. Increases in National Insurance, environmental taxes and the national minimum wage are all set to have an impact in 2003. We cannot continue to absorb increased costs while investing to provide better services and keeping prices low.
'Yet again the Chancellor has failed to grant cost effective tax relief to help retailers tackle the £2.4 billion annual cost of retail crimes and failed to deliver on the promise to introduce PayCom – the payments regulator which would save the industry £400 million.
'The pre-budget report has only added further pressure on the cost base of business and could seriously compromise retailers' ability to keep prices down and to continue to improve value.'