The move comes against a "worsening economic backdrop,” the Chancellor said, defending his reactive policy approach in the Commons.
Sunak said: “The Government’s intention is for the new health restrictions to remain only until the start of December.
“But, as we saw from the first lockdown, the economic effects are much longer lasting for businesses and areas than the duration of any restrictions.”
Workers can claim 80% of their wages if their workplace remains closed after the end of lockdown in December, up to £2,500.
Employers will pay just National Insurance and pension contributions.
Reviewed in new year
The Government will review the scheme in January to consider if employers should contribute more to the scheme.
It marks a shift from the policies outlined in Sunak’s Winter Economy Plan, which was dubbed as not going far enough to save pub sector jobs.
The Job Retention Bonus to encourage companies to keep on furloughed staff “obviously falls away” Sunak said.
What’s more, staff at pubs forced to close under tier three local measures will now be able to have 80% of their wages covered by the Government. This was just 67% previously.
The scheme will be reviewed in January to "decide whether economic circumstances are improving enough to ask employers to contribute more".
It can be used for any amount of time and shift pattern including full-time furlough.
The Chancellor said he wanted to explain why the Treasury had made “rapid adjustments to our economic plans as the spread of the virus has accelerated”.
Like the trade, the Government had hoped it would be possible to keep businesses open but after the virus rapidly spreading again another lockdown was the “only viable solution,” Sunak said.
He acknowledged there had been a “significant” economic impact on hospitality especially from other restrictions.
Changing policy was “just the thing that you have to do when circumstances change,” he added.
It was also announced the next income support grant for self-employed workers will be increased to 80% of average profits. This is for the period November to January and will be capped at £7,500.
The Chancellor told MPs the Government would provide "significant extra support to protect jobs and livelihoods in every region and nation" of the UK.
He went on to guarantee furlough funding for Scotland, Wales and Northern Ireland in the event of lockdowns.
Comfort to staff
Trade bodies welcomed the bolstering of financial support for pubs but said more needed to be done to protect the future of the sector.
British Beer & Pub Association (BBPA) chief executive Emma McClarkin said: “The Chancellor has listened to our concerns on the impact of coronavirus measures on the sector and delivered on some of the immediate support we need.
“The extension of the full furlough scheme until March 2021 will give businesses some certainty on the support they need for the difficult months ahead. It also recognises that tier three restrictions have the same devastating financial impact on our pubs and brewers as a full lockdown. This will give some comfort to our staff and provide our businesses with a better chance to survive these unprecedented times.”
McClarkin said the tiered restrictions should be reviewed to “ensure they are effective, proportionate and fair” during the next month.
The BBPA is calling for an extension of the VAT cut and the business rates holiday, as well as a significant beer duty cut.
More investment needed
“If such a stimulus package is forthcoming, we will begin to see the light at the end of the tunnel for our sector in this immensely difficult period,” McClarkin added.
UKHospitality chief executive Kate Nicholls said: “Extending the furlough scheme is a big boost and will help secure hospitality jobs in the medium term across the whole of the UK. Keeping jobs alive during this lockdown and throughout a bleak-looking winter period, which is likely to see businesses trading under severe restrictions, is key to the future survival of the sector.”
Enhanced grant support was needed by businesses to survive the “tough winter ahead,” Nicholls added.
UKH also called for a “clear roadmap for a return to business”.