Independent retailers face a looming cost crisis unless the Chancellor acts in the Budget, a leading independent retailers association has warned.

The British Independent Retailers Association (Bira), which works with over 6,000 independent retailers across the UK, says shop owners are increasingly nervous as the Budget on 28 October approaches, with business rates, employment costs and energy bills all set to squeeze already tight margins.

Bira has welcomed reports that the Chancellor plans to fund business rates cuts by making online marketplaces collect VAT, and is urging him to confirm that the money raised goes directly to rates relief for high street shops.

Andrew Goodacre, CEO of Bira, said: “We appreciate that the economy is challenging and the Chancellor has limited room to manoeuvre, but independent retailers will have even less headroom if support is not forthcoming in the Budget. Rates, employment and energy costs are all heading in the wrong direction, and independent retailers need to see action on all three.”

Bira warns that, without action in the Budget, the average independent retailer faces a business rates bill next year that is 25% higher than this year, before inflation is added.

Mr Goodacre said: “Such an increase is simply not sustainable in the current climate. Many independent retailers are already operating on the finest of margins, and a rise on this scale could be the difference between keeping the doors open and closing for good.”

The association is also calling for action on employment costs. Bira says the cost of employment has risen significantly over the past two years, a period in which the retail sector has lost around 100,000 jobs, and the increases in employer National Insurance contributions continue to weigh heavily on smaller businesses.

Mr Goodacre added: “The NIC increases are still damaging. If we want to create opportunities for younger people in independent retail, the Government needs to increase the Employment Allowance to reduce the cost of employment. Independent shops are often where young people get their first job, learn customer service and build the confidence to develop a career. We cannot afford to lose those opportunities.”

On energy, Bira is warning of a tough winter ahead, with prices set to rise. The association wants smaller businesses to have access to more flexible energy contracts, allowing them to switch suppliers and shop around for a better deal in the same way as domestic customers.

Mr Goodacre said: “Too many small businesses are locked into rigid energy contracts with little room to move when prices change. They should have the same freedom as domestic users to shop around. Giving independent retailers that flexibility would make a real difference to their ability to manage costs this winter.”

He added: “This Budget is an opportunity to show independent retailers that the Government is on their side. Action on business rates, employment costs and energy would give them the headroom they need to invest, employ and keep our high streets thriving.”