The proposal expected in Wednesday's Budget could give elected mayors
and councils powers to relax laws locally if it might boost economic
activity.
Current laws allows smaller shops to open all day, but restrict those over 280 sq m (3,000 sq ft) to six hours.
The Association of Convenience Stores said some small shops could struggle.
The
Treasury pointed to research by the New West End Company - which
represents more than 600 businesses in London - that suggested two extra
hours of Sunday trading could create nearly 3,000 jobs in the capital.
It said such a move would also generate more than £200m a year in additional sales in London.
Olympic Games trial
The
proposal comes after larger stores and supermarkets were allowed to
open for longer on Sundays during the 2012 London Olympic and Paralympic
Games.
Mr Osborne said decisions on similar relaxations of the
law should be taken at a local level - if officials think longer opening
hours would boost economies.
The chancellor said there was a "growing appetite" for shopping on a Sunday.
"There is some evidence that transactions for Sunday shopping are actually growing faster than those for Saturday.
"The
rise of online shopping, which people can do round the clock, also
means more retailers want to be able to compete by opening for longer at
the weekend.
"But this won't be right for every area, so I want
to devolve the power to make this decision to mayors and local
authorities," he added.
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