George Osborne is braced for a battle with Labour, the trade unions and the Church of England as he paves the way for a possible full liberalisation of Britain’s Sunday trading laws.

The chancellor confirmed on Sunday that restrictions on Sunday trading would be lifted this summer during the Olympic and Paralympic Games, because it would it would be a “great shame” if visitors to Britain found the country with a “closed for business” sign on it.

Although he stressed the relaxation would only last for the Olympic period – eight weeks starting from July 22 – Mr Osborne gave a broad hint that it might pave the way for a more permanent and liberal Sunday shopping regime. “Maybe we will learn some lessons from it,” he said.

Mr Osborne and David Cameron, prime minister, are both seeking ways to prove they are serious about lifting regulatory burdens on business and Britain’s Sunday trading laws are among the most visible and emotive causes they could pick.

Ed Balls, shadow chancellor, opposed the move, saying he supported the “Keep Sunday Special” campaign, which he said ensured working mothers could stay at home with their families on Mothering Sunday.

John Hannett, general secretary of the shopworkers’ union Usdaw said members were “vehemently opposed” to further deregulation of Sunday trading hours.

“Deregulation would do little to stimulate growth or create jobs, but would have a very detrimental impact on the lives of millions of shopworkers and their families.”

The Church of England was also quick to criticise any relaxation of rules, which stipulate that any shop with a floor space of more than 306 sq yards – including large supermarkets, and garden centres – can only open for up to six hours on Sunday between 10am and 6pm.

“We believe that for family stability and community life, as many people as possible should have the possibility of a common day off every week,” the Church said

A Sunday trading relaxation was considered ahead of last year’s budget but quietly dropped after being seen as politically too risky.

Even retailers expressed caution. Richard Dodd, head of media and campaigns at the British Retail Consortium, a trade body, said its members were split on the issue. “It’s partly about the division between small and big [storeholders] but it isn’t just that,” he said. “Some big retailers are opposed to reform.”

When the matter was last reviewed by the government in 2006, Tesco came out in favour but John Lewis was opposed to reform. Although any change in the law would not require stores to open for longer, the risk of losing business to rivals who did extend their hours could force the entire high street to shift, whether they wanted to or not.

Sunday has become the week’s most intensive trading day, on an hourly basis, since opening hours were relaxed in 1994, because big stores can only open for six hours – although Saturday is still the most lucrative day of the week overall for retailers.

“Whether the extended hours would produce enough extra demand on top of what is already there on a Sunday or just extend it over the longer hours – that is the essence of the debate,” Mr Dodd said.

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