Retailers have hit out after the prospect of a further rise in VAT was floated at a crisis meeting last week between furniture retailers, the Department for Business and the Bank of England.

Retailers who attended the meeting on Wednesday - held just two days before Habitat called in the administrators - claimed that policy makers had “tested the waters” for a further VAT rise. However this has been denied by the Government, which has insisted that no VAT rise is planned and that no Government representative floated the idea.

However one retailer at the meeting left with the impression that a further hike was being mulled and described that prospect as “scary”.

The source said: “I was really shocked [the meeting] wasn’t about how to stimulate growth”, adding that any further rise would decimate retail sales.

But a Department for Business spokesman said: “No consideration is being given to a rise in VAT. Any suggestion that this prospect was raised by Department for Business officials is absolutely untrue.”

Retailers including Harrods, Argos, John Lewis, Dreams, DFS and Furniture Village are understood to have attended the meeting, held at the London Marriott County Hall Hotel.

The purpose of the meeting, organised by the British Retail Consortium, was to discuss the scale of the challenges facing furniture retailers at present, and to make policy makers aware of the issues facing the industry.

It was the first such meeting ever held, reflecting the acute challenges facing furniture retailers in particular. On Friday Habitat hit the wall while on Thursday Homeform filed an intent to appoint an administrator.

The BRC’s director of business and regulation Tom Ironside said that retailers at the meeting  were in “absolute agreement” that any upward movement on interest rates or VAT would “have a really serious impact on the sector”.

Issues including credit insurance and business rates were also discussed at the meeting.

Ironside said that the meeting was “positive” and that both representatives from the Bank of England and the Department for Business were “very interested in the issues highlighted”.

A Treasury spokesman also reassured retailers that there is no intention to increase VAT. He said: “There is no consideration being given to a rise in VAT.”