The Government has ditched plans to introduce legislation to abolish upward only rent reviews in commercial property leases, citing constitutional difficulties for the u-turn.

The current regime means that commercial rents can only be increased when they are reviewed.

The law has been blamed for the closure of many businesses which claimed that they would otherwise be viable if they were not being forced to pay rents above prevailing market rates.

The Government had been working on proposals to change this, but the Minister for Finance Michael Noonan said in his Budget speech that it had proved impossible to develop a "targeted scheme" to tackle the issue that would not have been vulnerable to a legal challenge.

In a joint statement issued later with Mr Noonan, Minister for Justice Alan Shatter, who had been working on developing the scheme, said that any scheme ran the risk of breaching constitutional property rights, and would have been open to a legal challenge.

He added that the Government was made aware that any legislative scheme would require compensation to be paid to those whose rights would have been infringed.

The Grafton Street Tenants Association, which has been campaigning for a new rent review regime, said the development amounted to a betrayal of the retail sector that could cost thousands of jobs.

"This move, combined with a 2 per cent increase in VAT will be the last straw for many retailers," said association spokesman John Corcoran. "No other commercial tenants in the euro zone have to endure this ruinous commercial lease law which has destroyed our country and was endorsed and copper fastened by our own government."