Wholesalers and manufacturers are urging the government to protect the legitimate supply chain by refraining from making any more inflation-busting duty increases in its March 23 Budget.

Further steep price hikes on alcohol and tobacco would serve only to encourage higher levels of smuggled product and associated criminality, the Federation of Wholesale Distributors (FWD) has warned.

In its submission sent to the Treasury last week, the FWD also urged the government to ensure that alcohol fraud was treated as a priority area for action. "This fraud is costing the Exchequer much-needed tax receipts and is also undercutting prices and having a severe impact on the economic viability of legitimate traders," it said. "Some FWD members are reporting losses of up to 40% on alcohol sales such is the scale of the fraud, and their businesses are subsequently being threatened with closure."

Christopher Ogden, chief executive of the Tobacco Manufacturers Association, also called for restraint on rises in duty. "The government is due to launch its refreshed Tackling Tobacco Smuggling Strategy next month, but this could be undermined by any further above-inflation increases in taxation," he warned.

The Association of Convenience Stores, meanwhile, has recommended that the Chancellor clamp down on tobacco and alcohol duty fraud by setting a target of a 50% reduction in the trade.

The trade group would also like to see the government reduce the cost of business rates by ending the link between rate rises and RPI measures of inflation and halt above-inflation increases in the national minimum wage.