Budget 2018: Chancellor Philip Hammond to announce £1.5bn plan to support Britain's high streets

High retail business rates in popular locations have long been a source of discontent for the sector, with many firms complaining that their online rivals like Amazon do not face similar levies

The chancellor will next week attempt to assuage fears over the future of the beleaguered UK high street with a £1.5bn package of business rates relief and town centre infrastructure spending.

Philip Hammond, delivering his Budget on Monday, is set to announce £900m of business rates relief for around half a million small retailers, saving them around a third off their bills.

High retail business rates in popular locations have long been a major source of discontent for the retail sector, with many firms blaming them for squeezing their profitability and complaining that their online rivals like Amazon do not face similar levies.

According to the Local Data Company, the UK’s high streets suffered almost 5,855 store closures in 2017, the highest of any year since 2013.

The Treasury said a pub in Sheffield with an annual rent of £37,750 would save around £6,200 in rates due to this latest relief, while a newsagent in Birmingham paying £14,250 in rent would save £1,800.

Business rates bought in £29.6bn to the Exchequer in 2017-18, a sum that had been due to rise to £30.8bn in the current financial year.

The most recent UK business rates revaluation came into effect in April 2017, based on 2015 rental values.

The previous government valuation had been completed in 2010, meaning that some companies found themselves facing sharply higher rate bills due to substantial growth in their rents over that same period.

Business rates are charged at roughly just under half the level of rents in the valuation year.

The Treasury claims it has given firms around £10bn in transitional relief since 2016.

There is also set to be a £650m fund announced by Mr Hammond on Monday to spruce up high streets and make them more attractive destinations for shoppers.

“This package will provide short-term relief for struggling retailers and a long-term vision for town centres, helping them to meet the new challenges brought about by our changing shopping habits,” said the Treasury.

The most recent official retail sales figures show that 17 per cent of sales were online in September, up from 10 per cent just five years ago.

The Chancellor’s biggest challenge in the Budget will be to find the money to deliver on Theresa May’s recent pledge to “end austerity” amid a possible hit to GDP growth rate from Brexit in 2019, although he is expected to be helped by a reduction in borrowing forecasts over the next few years from the Office for Budget Responsibility on the back of better than expected tax revenues this financial year.