But now the rises have been rescinded in favour of "sensible discussion" about the rents.

Businesses in the Victorian Hepworth's Arcade were shocked to be sent letters from Hull Council announcing increases of between 15 and 175 per cent.

Many are struggling in the current economic climate and have seen falling footfall as shoppers have diverted to the new St Stephen's shopping centre on the other side of town.

Sue Seddon, who runs the Coffee Cup cafe with her business partner Janette Webster, was told her £6,500 rents was being increased by 175 per cent. She said: "Basically what the letter says is you either sign the new lease or be evicted in October.

"Janette is worried sick and I am not sleeping. We couldn't possibly afford it."

Yesterday afternoon a clearly stung council leader Carl Minns – who had not known about the hikes until informed by the Yorkshire Post – said the increases would be rescinded and a letter of apology sent to traders.

Mrs Seddon said they had cut staff and had only just managed to weather problems last year which nearly took them under. The rent rise would finish them off.

Mrs Seddon added: "They say the footfall has gone up 20 per cent down Whitefriargate but we aren't Whitefriargate and I would say this end has gone down 30 to 40 per cent since St Stephen's.

"The small shops just can't compete. We think they must want us out. We thought it was a misprint to go up that much. If everybody had the same it would be fair but we feel we've been singled out."

Other retailers were also angry. Sue Fanthorpe, whose family business has been selling electrical equipment in the arcade for 65 years, says the council is not even maintaining the arcade properly.

She added:"It puts considerable pressure on the business given the current economic climate. Footfall must be down 30 per cent.The message they seem to be sending independent retailers is that they don't really want us here."

Elaine Van Gils, of Kingston Stationers, who has been told to pay an extra £25 a week, said she was horrified. She said: "Business is dead. You have to sell an awful lot of cards to make anything."

Tory councillor Andy Sloan said the move displayed a "complete lack of business acumen by the bureaucrats within the council" and said it was why he had pushed for the outsourcing of the property section when he was a Lib Dem Cabinet member.

He said: "Any rent increase, let alone one of between 15 per cent and 175 per cent, is quite ridiculous. In the current economic climate it is commercial madness."

After being informed by the Yorkshire Post of the increases Coun Minns took swift action. He said: "I have just issued instructions for the rent increases and the letter to be rescinded and I will be asking the chief executive to issue an apology on behalf of the council for the hurt and distress caused. The property department will meet with the traders and explain why they have taken this unilateral decision and for a sensible discussion to take place about the rents."

The Victorian arcade was built in 1894.