The closure of shops, pubs and other services in small towns and villages could destroy community life in Britain within 10 years, a report from the New Economics Foundation think tank says.

The report, published yesterday, says the country lost, about a fifth of its corner shops, grocers, high street banks, post offices and pubs, a total of 30,000 local outlets, between 1995 and 2000.

It warns that a further 28,000 outlets may close by 2005 as supermarket chains increase their stranglehold on retailing. The report predicts that if trends continue, many small communities of fewer than 3,000 people will be left without any local shops, or pubs by 2010.

The result, it says, will be "ghost-town Britain", in which town centres fall into terminal decline, unemployment rises, people become isolated and communities suffer growing crime and social exclusion.

It says: "There is a risk that local retail, eroded over many years, may suddenly collapse when it reaches a minimum viable density. Britain is faced with the spectre of a 'tipping point' where the number of outlets would crash dramatically rather than continue its current steady decline."

The countryside agency says country pubs are shutting at a rate of six a week in England. The Rural Shops Alliance estimates that there are fewer than 12,000 rural shops left in Britain, while Grocer magazine says 300 are closing every year.

Among the solutions the report suggests to tip the balance in the right direction, it says local authorities should be allowed to veto large retail developments or impose conditions, such as local procurement.

Rate relief should be extended to more small stores and shops in towns and villages in decline, and also to pubs and community pharmacies where the local economy has been in decline, and should be discretionary, rather than the mandatory 50% of today.