Technology companies have warned the chancellor that they will pull post-Brexit investment from the UK if he goes ahead with a tax on digital sales in next week’s budget.

The industry group representing multinationals such as Facebook and Amazon have written to Philip Hammond warning that they will reduce spending if he makes a “smash and grab raid” on their earnings. They have also warned that any attempt to impose a specific tax on mainly American digital multinationals would result in retaliation from President Trump.

“Such discriminatory treatment against the US could be viewed as grounds for retaliation through the use of tariffs,” they said. “Given the range of retaliatory measures available, the impact on UK businesses operating overseas could be highly damaging.”

Mr Hammond