Brace for the Covid bill: Rishi Sunak warns the UK economy 'will get worse before it gets better' as he says lockdown will have 'significant' cost and hints at looming tax rises - with footfall in shops already down 27 per cent last week

Rishi Sunak today warned Britons to brace for the economy to get 'worse before it gets better' as he said the new coronavirus lockdown will have a 'significant' cost.

Despite saying vaccines offered 'hope' and there were signs of 'resilience' in UK plc, the Chancellor delivered a grim message about the scale of the devastation from the pandemic.

In a statement to MPs, he insisted the government was right to have taken measures including offering another £4.6million in grants and discretionary support for stricken businesses.  

But Mr Sunak put the country on notice of looming tax rises and spending cuts, as he said he is determined to take action to 'repair' the public finances when the immediate crisis is past.   

The gloomy assessment came as figures showed footfall at shops plunged more than a quarter last week as the brutal restrictions came into force.

Total shopper numbers tumbled by 27.1 per cent in the seven days to January 9 compared to the previous week. 

The grim figures from research group Springboard emerged as Mr Sunak appeared before MPs for the first time since announcing a bailouts to prop up businesses.

But he faced calls from Labour to go even further amid warnings that many normally thriving firms are 'fighting to survive'.

In a statement to MPs, Rishi Sunak insisted the government was right to have taken measures including offering another £4.6million in grants and discretionary support for stricken businesses

Overall, shopper numbers tumbled by 27.1 per cent in the seven days to January 9 compared to the previous week - with some retail locations hit harder than others 

There are fears that the UK is now tracking the downside scenario set out by the OBR watchdog at the end of November, after mutant coronavirus forced fresh lockdown

How the government's coronavirus costs are set to top £300billion

£280billion 

Cost of the response for 2020-21 as given by Chancellor Rishi Sunak at the Spending Review in November. 

Includes support for the NHS and other public services, plus test and Trace and 'moonshot', as well as furlough and self-employed schemes, tax relief and extra funding for devolved administrations. 

£6billion 

Estimated cost of extending the furlough for another month to the end of April, announced in December.

£4.6billion 

The predicted cost of grants for businesses announced today for the third national lockdown, plus a discretionary fund for local councils to deploy. 

Up to £26 billion 

The NAO's estimate of the cost of Bounceback loans that will not be repaid due to fraud or insolvency. 

£55billion 

Public sector funding for the coronavirus response already allocated to next year. 

Unclear

The costs of extra unemployment and other benefits due to the pandemic.

£120billion 

Additional borrowing expected in 2020-21 as a result of lost tax revenue due to the economic slump. 

Last week Mr Sunak hinted furlough could be extended again as he announced another £4.6billion of bailouts for lockdown-stricken businesses - with economists warning of the 'colossal' hit from the surging pandemic.

Venues hammered by Boris Johnson's dramatic decision to impose a new lockdown are getting one-off grants of up to £9,000 to keep them afloat over the next seven weeks.

Some 600,000 premises across the UK are set to receive the cash, while another £594million is being pumped into a 'discretionary fund' to support other firms affected.

Mr Sunak did not make any move on furlough today, merely pointing out it had already been extended to the end of April. 

He said: 'Even with the significant economic support we've provided, over 800,000 people have lost their job since February.

'And while the new national restrictions are necessary to control the spread of the virus, they will have a further significant economic impact.

'We should expect the economy to get worse before it gets better.'

Mr Sunak said vaccines meant that the UK could 'start to see a route out of coronavirus'.

He said the government had pumped £6billion into the vaccine drive.

But he cautioned: 'Many people are losing their jobs... our public finances have been badly damaged and will need repair.'

In another strong signal of a reckoning to come, he said: 'It is time for responsible management of our economy, taking the difficult but right long term decisions for our country.' 

Springboard said the reduction in footfall was 35 per cent week-on-week in shopping centres, 26 per cent in high streets and 21.3 per cent in retail parks.

The organisation's director During the first full working week of 2021 and introduction of lockdown 3.0, the reduction in footfall across UK retail destinations from the week before was nearly as great as that during early November when England entered lockdown 2.0,' said Springboard director Diane Wehrle.

On a year-on-year basis, footfall across all UK retail destinations was 63.8 per cent lower than in the same week last year.

Despite the running costs of the coronavirus response spiking above £300billion, Mr Sunak has pointedly refused to rule out keeping the massive furlough scheme beyond the end of April, merely saying he would 'take stock' at the Budget in March.

However, businesses warned that the package is not enough, amid pressure for VAT and rates relief to be kept in place to stop a wave of bankruptcies.  

There are fears that the lockdown will slash GDP by up to 10 per cent in every month it is imposed - although the respected IFS think-tank has said the impact might be lower as businesses have adapted since the first squeeze in March.

The government's finances are also under pressure with borrowing set to top £400billion this year, and Mr Sunak already having warned of a reckoning later to balance the books. 

A regional breakdown of the Springboard figures showed Central London has seen a far greater drop in footfall than suburbs, at 25.9 per cent week on week compared to just 6.8 per cent.  

Although the figures showed the weekly decline in footfall was nearly as great as in the second lockdown - suggesting Britons were complying with the call to stay at home - traffic data painted a different picture. 

This revealed that rush-hour congestion in London this morning was at its highest level since England's third national lockdown began - adding to concerns that fewer people are abiding by the restrictions than during previous shutdowns.

The pandemic had already sounded the death knell for retailers including Oasis, Warehouse, Laura Ashley and Debenhams, and the stark figures do little to ease the sense of uncertainty in the sector. 

Paperchase is the latest retailer to come into trouble, and earlier this month announced it is on the brink of administration after Covid restrictions placed 'unbearable strain' on the card and gift retailer's Christmas sales. 

Today's footfall results varied dramatically by geography.

In the South West, the East and West Midlands and North & Yorkshire the decline in footfall from the week before exceeded 35 per cent and reached over 40 per cent in the East Midlands and the South West.

However, in the South East and Greater London, which have the highest infection rates, footfall only declined by 8 per cent and 10.7 per cent respectively. 

However, in London this was driven by Outer London areas where the drop in footfall was only 6.8% versus 25.9% in Central London.

Despite this, the drop in footfall in Central London was still noticeably less than in regional cities outside of the capital where footfall declined by 39.6 per cent.

In Wales and Northern Ireland footfall actually rose from the week before (by 10 per cent in Wales and by 27.1 per cent in Northern Ireland), although despite these increases footfall in both nations remains two thirds lower than last year. 

Shadow business secretary Ed Miliband today pointed to research showing 250,000 small businesses could fold without more support.

'The message from businesses is clear: support is not remotely equal to the scale of the emergency,' he said.

'Many are excluded, grants do not properly cover the costs facing firms, businesses are staring at fast approaching cliff-edges in support and there is a massive issue of the debt burden they have accumulated.

'The Government's approach throughout this crisis means the UK is already facing the worst crisis of any major economy. 

'Rishi Sunak must start listening to the businesses fighting for survival and come up with a proper plan for the months ahead which matches the gravity of the crisis.'

Alarm is growing at the state of the government's finances, with borrowing set to be high for many years to come