The Government has rejected calls by senior Conservative MPs to scrap a planned rise in corporation tax.

Rishi Sunak is facing the prospect of a rebellion over the policy to hike the tax from 19% to 25%, underlining Tory splits on the economy.

Seven Tory backbenchers, business leaders and economists signed a letter demanding the Prime Minister “abandon” the increase.

But a Government spokesperson insisted it was “vital” to stick to the plan to halve inflation this year and reduce debt.

In their letter to Mr Sunak, the leaders of several influential Tory backbench groups urged the Prime Minister to “follow a growth agenda”.

“If the increase proceeds, potential new jobs and higher national output will be lost and your commendable ambition of transforming Britain into a ‘science superpower’ will be undermined. Levelling-up hopes will be hit hard.”

Drugs giant AstraZeneca’s decision to build a £320 million factory in low-tax Ireland instead of the UK was “a harbinger of what may come”, they wrote.

Signatories included David Jones, a former Brexit minister and fellow at the Centre for Brexit Policy; Simon Clarke, chairman of the Conservative Growth Group formed by allies of Liz Truss; Northern Research Group founder Sir Jake Berry; and ex-cabinet minister Sir John Redwood.

Former Tory leader Sir Iain Duncan Smith and European Research Group chairman Mark Francois also put their names to the letter.

It is the latest push from some wings of the party to pressure Mr Sunak and Jeremy Hunt to slash taxes in their March 15 budget.

But the Chancellor has warned that the state of the public finances means it is unlikely there will be significant cuts.

In response to backbenchers’ demands over corporation tax, a Government spokesperson said: “Growing the economy is one of the Prime Minister’s top priorities, which is why we have maintained record levels of capital investment and R&D spending, as well as continuing to incentivise investment through measures such as the Seed Enterprise Investment Scheme and the now-permanent £1 million Annual Investment Allowance.

“To promote long-term growth it’s vital we stick to our plan to halve inflation this year and reduce debt.

“From April our corporation tax rate will still be the lowest in the G7, keeping the UK internationally competitive, and businesses with profits below £250,000 will be protected from the full rate rise, with 70% of UK companies not facing any increase at all.”