Small and medium-sized business owners have been warned that rail fares may rise by up to 8% next year if the Department for Transport (DfT) is hit hard in the government's spending review.

The majority of rail fares are currently capped at inflation plus 1% but this could rise to 2% or 3%. Increases are based on July's RPI measure, expected to be 5%, which could mean increases of up to 8%.

"It would normally be the case that next year's regulated train fares are calculated using July's inflation figure, plus 1%. But this is not a normal year. The scale of the financial crisis that we have inherited means that we will have to make some tough decisions in the spending review which concludes this autumn," said Transport Secretary Philip Hammond.

"I am therefore not yet in a position to determine next year's fare increase. It would be irresponsible, at a time when investment in the railway is under pressure, to rule anything out until the spending review is concluded."