As the VAT rate rises to 20%, its highest ever rate, retailers have warned that supply chain pressures will leave them unable to absorb the extra costs indefinitely.

Retailers are keen to cushion the blow to consumers after widespread snow and ice led to disappointing pre-Christmas sales for many, but cost pressures in the supply chain are making it difficult for businesses to shield shoppers from the increased costs.

According to research by the Centre for Retail Research and online shopping group Kelkoo, retail sales will fall by about £2.2 billion in the first three months of the year as a result of the rise in VAT.