Rishi Sunak has succumbed to pressure from business leaders and announced more than £1bn in support for companies across the UK hit hardest by the pre-Christmas surge in the new Omicron variant of coronavirus.
The announcement marks a change in stance by the chancellor, who had previously insisted that sufficient measures were in place to support beleaguered businesses through until the spring.
But Sunak decided to take action amid a wave of cancellations in the hospitality and leisure sectors in what is usually their most busy period of the year in the run-up to Christmas.
Those two sectors will be the biggest beneficiaries of the new announcement, being eligible for one-off grants of up to £6,000 per premises — worth a total of up to £683m for England alone for an estimated 200,000 businesses.
Another £100m of discretionary funding will be made available for councils in England to support companies in other sectors.
Ministers will also pledge to cover the cost of statutory sick pay for Covid-related absences for small and medium-sized employers and hand over a further £30m for the Culture Recovery Fund.
The final piece of the package is £154m to provide equivalent support in Wales, Scotland and Northern Ireland.
Kate Nicholls, chief executive of UKHospitality, described it as a “generous package” that would give “an immediate emergency cash injection for those businesses who, through no fault of their own, have seen their most valuable trading period decimated”.
She added that the boost to funding for suppliers and event and catering companies was “particularly welcome”.
Mike Cherry, national chair of the Federation of Small Businesses, welcomed the announcement: “These positive measures will help alleviate the intense pressures that small firms are currently under, and hopefully arrest a significant decline in confidence over this year,” he said.
The announcement comes amid a tussle between cabinet ministers and government scientific advisers over whether to introduce fresh restrictions after Christmas — for example preventing parties indoors.
A cabinet meeting on Monday failed to come to any firm decision on whether to impose a festive “circuit breaker” over the New Year. The cabinet will meet again on Wednesday to consider fresh data on the severity of the Omicron variant.
Prime minister Boris Johnson was shaken by a vote last week when about 100 Tory MPs voted against a mild set of new restrictions designed to stem the spread of Omicron.
The imposition of new restrictions could see Sunak come under further pressure in the coming days to provide other forms of support for struggling companies. The Trades Union Congress said on Tuesday that the government should revive its job support scheme — “the furlough” — which saw state subsidies for jobs during previous lockdowns.
The British Chambers of Commerce said: “Whilst these measures are a positive starting point, if restrictions persist or are tightened further, then we would need to see a wider support package, equal to the scale of any new measures, put in place.”
In its announcement on Tuesday, the Treasury acknowledged that pubs and restaurants had seen mass cancellations and reduced footfall because of the sudden spread of the new coronavirus variant.
UKHospitality said many companies had lost 40 to 60 per cent of their trade in December, which is usually their most profitable month.
But the Treasury said that companies now had more cash in the bank than at the start of the coronavirus crisis, while insolvencies in hospitality were running 25 per cent lower than before the pandemic.