Family businesses are urging the government to consult on changes to inheritance tax (IHT), warning the move represents a “hammer blow” to the UK economy.

Some 160,000 family-owned firms – represented by 32 trade associations – have written to Chancellor Rachel Reeves to request a formal consultation on IHT changes in the Budget.

The letter, led by Family Business UK, warns that changes to business property relief (BPR) and agricultural property relief (APR) will deprive the economy of investment and result in forced, premature business sales and job losses across the UK.

According to independent economic modelling by CBI Economics, the changes to BPR alone could see a £1.25bn net fiscal loss to the Treasury and some 125,000 job losses.

Neil Davy, Family Business UK chief executive, said: “The changes to IHT for family businesses and farms are a hammer blow.

“In many cases, those inheriting the business will have no alternative but to sell up when the owner dies, rather than continue running the business.

“In these circumstances, there is a real risk that businesses, assets and farms will be sold to foreign-owned competitors or investors who will pay little to no tax in this country.”