Chancellor John Healey has raised the threshold for Small Business Rate Relief for retail, hospitality and leisure firms and announced a new deal for data centres, in the first Budget of Andy Burnham’s government.

Business rates

Healey said he would increase the rateable value threshold for the relief from £12,000 to £18,000. He said this would take 70,000 more businesses out of business rates altogether, meaning “half of our shops, restaurants and gyms” pay none. Other retail, hospitality and leisure businesses will have their rates frozen in real terms, so none face an above-inflation rise for the next two years.

According to rating consultancy SHW, the change takes effect in April 2027, with the tapered relief threshold rising to £21,000. The firm also pointed to the abolition of Valuation Tribunal appeal fees in England, with fees already paid on 2026 appeals to be refunded.

Luke Longley, Director in SHW’s Rating team, called the threshold increase “a positive and long-overdue step”, but said it was “disappointing that the measure is restricted to those sectors”. He added that correct classification will matter more, warning that businesses in non-traditional premises can be overlooked. “A gym trading from a former industrial workshop, for example, may not always be readily identified as qualifying for relief,” he said.

Stephen Springham, Partner, Retail Research at Knight Frank, said the move “may benefit some small traders and sole operators, but will not address underlying high street pressures”. He noted that there was no revaluation at this Budget, which left the Chancellor with limited levers to pull.

Healey also confirmed the 20% cut in rates for pubs, clubs and music venues from April 2027. To help pay for the support, he is raising Machine Games Duty from 20% to 25% for higher-stakes machines, while protecting pubs and seaside arcades.

He also committed to local authorities keeping 100% of business rates by the end of the decade, with 20% of business rates revenues going to Mayors from next year.

Data centres

Healey announced a British Data Centre Covenant, setting strict tests for operators. They must invest in local communities, create local jobs and protect local water supplies. In return, critical data centres will get the grid connections they need and, where necessary, be allowed to build onsite generation while they wait.

Darren Mansfield, Partner and Head of Insight, UK Cities & Data Centres at Knight Frank, said the “direction of travel is positive” and that priority connections could give investors more confidence that schemes will progress. However, he warned that the covenant does not create new grid capacity and that prioritising certain projects “risks creating a two-tier market”. Community and environmental commitments, combined with the cost of onsite generation, may favour the best-capitalised developers, he said.

Wider Budget

Healey said he had met his fiscal rules without raising taxes on working people. The Budget extends the 5p fuel duty cut to July and includes a £100 winter energy payment for households in council tax bands A to D.