Around 200,000 businesses will be eligible for business grants which will be administered by local authorities and will be available in the coming weeks.
The Government will also cover the cost of Statutory Sick Pay for Covid-related absences for small and medium-sized employers across the UK
"With the surge in Omicron cases, people are rightly exercising more caution as they go about their lives, which is impacting our hospitality, leisure and cultural sectors at what is typically the busiest time of the year," says Prime Minister Boris Johnson.
"That’s why we’re taking immediate action to help with an extra £1 billion in grants to these industries and reintroducing our Statutory Sick Pay Rebate Scheme. I urge people across the country to please get boosted now to secure vital protection for yourselves, your loved ones and your communities."
Sunak added that he recognised that the spread of the Omicron variant means businesses in the hospitality and leisure sectors are facing huge uncertainty, at a crucial time.
Local Authorities will have discretion to allocate this funding to businesses most in need. The ARG top up will be prioritised for those local authorities that have distributed the most of their existing allocation. This is on top of the £250 million of previously allocated funding that remains with local authorities.
Plan B measures - which include guidance to work from home - and a related crash in consumer confidence as Omicron surges has already left many hospitality businesses close to collapse.
Yesterday, trade body UKHospitality warned that December is set to be 'a disaster' for a sector which had much riding on the festive trading period.
Over half (54%) of venues were down more than 40% in revenue last weekend, with one in five businesses reporting a crushing sales drop of more than 60%.
On top of this, 88% of operators say they feel negative about the potential of New Year’s Eve trading and four in five operators have already experienced cancellations for bookings in what was already set to be a quiet Q1 next year.
The crisis is most severe in central London where hospitality businesses have seen a 70% drop in revenues.
While the bail out will be welcomed by businesses, more support is likely to be needed over the coming weeks.
“This is a generous package building on existing hospitality support measures to provide an immediate emergency cash injection for those businesses who, through no fault of their own, have seen their most valuable trading period annihilated," says UKHospitality CEO Kate Nicholls.
“It will help to secure jobs and business viability in the short term, particularly among small businesses in the sector, and we particularly welcome the boost to funds for the supply chain and event and business catering companies so badly affected by the reintroduction of work from home guidelines."