The high street rescue plan will be announced by the chancellor in Wednesday’s budget and will offer grants to non-essential retailers. 

Under the plans, retail businesses will be eligible for direct cash grants of up to £6,000 per store to help them start trading again when allowed to do so. The grants are to be distributed directly to firms by local authorities from April and will replace the current monthly grant system. Chancellor Rishi Sunak also promised more support to come for the economy. He said it had been an “incredibly difficult year” for the high street, and the grants would give retailers the “support they need to get them through, get them back on their feet”.

However, the chancellor is facing increasing pressure to avoid or postpone significant corporation tax rises, as companies struggle to come out of the latest Covid-19 lockdown in a strong enough state to reopen.

There have been questions concerning the extent to which the grants were extensions to schemes due to finish at the end of March or new initiatives. However, experts believe that the move reflects growing government concerns about the future of struggling high street retailers.

Last week, leaders of small and medium-sized firms from the “Fighting Back for Business” campaign wrote to the chancellor calling for debts accrued through government-backed loans to be written off to avoid widespread retail insolvency.

Rishi Sunak commented: “Our local businesses have been hit hard by the pandemic – which is why we went big and went early with a multibillion pound package of support. There’s now light at the end of the tunnel and this £5b of extra cash grants will ensure our high streets can open their doors with optimism.”

Local authorities in England will also get an extra £425m to distribute to businesses not eligible for the restart grants but nonetheless experiencing a severe impact on their business due to public health restrictions. The administrations in Scotland, Wales and Northern Ireland will receive £794m of extra funding to distribute to businesses.

Last night business leaders said the £5bn in grants to help small firms would be vital, but although the initiative has been broadly welcomed, some industry groups said it was not enough.

Mike Cherry, national chairman of the Federation of Small Businesses, welcomed the “much-needed lifeline”, but called for the chancellor to set out more funding “for those that have been excluded from income support throughout this crisis”.

Helen Dickinson of the British Retail Consortium said the latest money was a “vital injection of funding” but warned it would “only provide temporary relief” if the business rate holiday did not continue.

The funding takes the total spent on direct grants to businesses during the pandemic to £25b, according to the Treasury.