Tesco is one of the 'Big Four' chains accused of pricing out smaller stores

Small retailers in the UK could be put out of business by large chains within 10 years unless the government takes preventative action, a report has warned.

The all party parliamentary small shops group is calling for an independent regulator to fully investigate the whole retail sector, in a bid to prevent big supermarket chains from taking over the high street.

And it wants a moratorium on retail mergers and takeovers until the investigation takes place.

The 'Big Four' supermarket chains  - Tesco, Sainsbury's, Asda and Morrisons - come under fire in the report for their aggressive competitive tactics.

It says supermarkets have occasionally resorted to anti-competitive measures to out-perform small shops, with some "strongly believed" to have used predatory pricing by offering discounts of between 33 per cent and 40 per cent to attract shoppers.

Newsagents and petrol forecourts are named as the two groups most unlikely to survive until 2015, followed closely by convenience stores and grocers.

And the report says the loss of these independent businesses will  "damage the UK socially, economically and environmentally".

High property costs, crime, poor planning, regulatory burdens, and distortion of the supply chain are also cited as factors behind the demise of smaller shops.

The all party group wants codes of practice to be brought in across the retail sector, a review of the tax system and an end to the Jersey VAT loophole to help small businesses survive.

Greg Mulholland, one of the MPs involved in the group, said the Office of Fair Trading's remit was not broad enough to regulate the entire retail industry and a new body was needed.

"This is an issue which the government can't ignore any longer. It is an issue of huge importance up and down the country to communities of different kinds that is supported by MPs from all parties," he said.

"We hope this report gives the government impetus to take the issue seriously. Otherwise there will be changes to British retailing which can never be reversed."

And the Federation of Small Businesses has called on the OFT to take a close look at the retail market to address anti-competitive tactics that may be used by larger retailers.

Clive Davenport, FSB trade and industry chairman, said: "The report is further proof that small shops are being bullied out of the market and that the OFT must look again at this issue.

"Its conclusions are a welcome step towards addressing the serious issues that face small independent retailers."

But British Retail Consortium director general Kevin Hawkins said the report was trying to turn the clock back.

He said: "The committee has entirely overlooked or not understood the critical importance of scale economies, not just in retailing, but in virtually every other sector of a mature economy such as that of the UK.

"No set of regulations can override the drivers of a modern competitive retail business."

And Tesco group corporate affairs director Lucy Neville-Rolfe, who gave evidence to the inquiry, said there was still a place for smaller businesses in the retail market. 

"People use both supermarkets and small shops at different times and as the report acknowledges the retail market is fiercely competitive," she argued.

"My conclusion is that the consumer is the best regulator and there is room in a thriving market for anyone who satisfies
customers."