The UK announced £4.6 billion ($6.23bn) in fresh lockdown grants to help businesses survive the third national shutdown to curb the spread of Covid-19.
Businesses in the retail, hospitality and leisure sectors will receive a one-off grant worth up to £9,000 after business groups and unions warned that mass job cuts would be inevitable without more help.
Finance minister Rishi Sunak said a further £594 million will help other affected businesses survive until the spring, with 600,000 firms set to benefit, as the new strain of the virus presents “a huge challenge”.
"The next few weeks will be difficult but the end is in sight," he said in a video statement on Tuesday.
“This will help businesses to get through the months ahead – and crucially it will help sustain jobs, so workers can be ready to return when they are able to reopen."
While the new one-off grants are in addition to existing support measures, such as grants of up to £3,000 for closed businesses, Mr Sunak did not pledge to extend the 100 per cent business rates relief for retail, hospitality and leisure businesses.
The business rates holiday, lower VAT rates and the furlough scheme are all set to end in April at a time when companies may only just be returning to operations.
Tony Danker from the Confederation of British Industry urged the government to extend access to business loan schemes beyond the current March 31 deadline and the furlough scheme beyond the end of April.
"More comprehensive restrictions require a more comprehensive economic response," Mr Danker said.
“Firms must have a clear line of sight and assurance that support will be there for as long as restrictions are in place so that they can stay the course rather than act precipitously."
Mike Cherry from the Federation of Small Businesses said the new tougher lockdown will cause widespread business failure and job losses, with businesses facing mounting bills as the business rates holiday ends.
“Current business support is plainly insufficient," he said.
Prime Minister Boris Johnson announced a new national lockdown on Monday evening, which implemented the strictest measures since March last year and will run until at least the middle of next month.
Non-essential retailers have been forced to shut their shops once again, along with hairdressers, gyms, restaurants and hospitality businesses.
The news was a body blow for businesses already reeling from the effects of the first two lockdowns.
Adam Marshall, director general of the British Chambers of Commerce, said he welcomed the new lockdown grant support, but warned it was "incremental" as billions have already been spent helping good firms to survive this unprecedented crisis and to save jobs.
"Ministers need to set out a clear support package for the whole of 2021 – not just until spring – to help businesses of all shapes and sizes survive this difficult and uncertain year," he said.
Helen Dickinson, chief executive of the British Retail Consortium, said 178,000 retail jobs were lost last year and more than 250,000 staff are on furlough, a number that could rise dramatically this year.
"The consequences of these latest restrictions – with non-essential retail already closed for several weeks – will be severe for many businesses who yet again face losing £2bn per week in sales,” she said.
Ms Dickinson said the government’s Covid-19 testing programme and a rapid introduction of vaccines were key to ending the “cycle of lockdowns,” with retailers offering their resources to help make this happen.
Nurseries, pharmacies and supermarkets will remain open as grocery sales hit a record £11.7 billion in December when many parts of the country were already under tighter restrictions.
Take-home grocery sales rose 11.4 per cent year-on-year over the 12 weeks to December 27, according to market researcher Kantar – a period spanning both the November national lockdown in England and Christmas.
"This year, almost all those meals were eaten at home and retailers stepped up monumentally to meet the surge in demand," said Fraser McKevitt, head of retail and consumer insight at Kantar.
While analysts expect London’s stock market to decline after Monday’s rally, the FTSE 100 was actually up in early morning trading, led by a jump in retail stocks following the record December grocery sales and Mr Sunak’s additional support measures.
The benchmark FTSE 100 index was up 0.13 per cent to 6,580 at 9.33am London time.
However, Naeem Aslam, chief market analyst at Avatrade, said the outlook is bleak for the UK because the “the government has failed terribly in controlling the coronavirus situation”.
“Consumers’ pockets are empty now, mortgage holders are struggling to keep up with their payments, while income has been slashed several times,” said Mr Aslam.
“Mortgage holders are no longer eligible for government support schemes because they used them before. Even during the second lockdown, consumers who utilised the government support schemes the last time were not allowed to use the same facility again. This is going to push the mortgage default rate much higher and much quicker this time.”
Britain's unemployment rate hit 4.9 per cent in the three months to October, with the Office for Budgetary Responsibility (OBR) expecting the level to peak at 9.7 per cent his year. OBR predicts the UK economy will have shrunk by 11.3 per cent in 2020.