Rishi Sunak has been forced to cut short a trip to California and fly back to London to draw up an emergency rescue package for hospitality firms hit by mass Christmas cancellations amid the Omicron wave. The chancellor held crisis talks with struggling firms by video link from the US on Thursday before his flight, after Labour said his absence from the UK was “an insult to British businesses and workers”. He returns to the Treasury on Friday – a day earlier than he had intended to fly home – under intense pressure to announce emergency financial help. The scramble came as Covid cases jumped to a historic high in the UK and after England’s chief medical officer, Chris Whitty, said that people should limit their social contact in order to have a better chance of spending Christmas Day with relatives. Business leaders warned that firms would not survive the winter without urgent intervention from the government, blaming a change in messaging as ministers try to suppress Omicron’s spread without directly imposing restrictions. They are seeking a reintroduction of the VAT cut for hospitality, expansion of business rates relief, immediate grants for firms in the hardest-hit sectors and a targeted return of the furlough scheme to allow companies to keep staff on the payroll. However, Treasury sources indicated there was a mixed bag of requests and it was not clear yet which would be an effective and appropriate use of taxpayers’ money, suggesting an announcement was not likely in the next 24 hours. A government insider said that one of Sunak’s first priorities when he lands in the UK on Friday would be “unblocking” £250m held by local authorities under the additional restrictions grant for firms severely affected by Covid rules. About 75% of councils are said to still be waiting to hand out up to half of their share. Businesses stressed the need for urgent action, with concerns mounting that consumer confidence has already plummeted during a key trading period. The pub industry reported 3.2m cancellations last week alone and predicted 37m fewer pints would be sold, at a cost of £237m. Trade body UKHospitality estimated the cost to the wider industry at £4bn, with sales down by a third over just 10 days and set to fall further. Chris Jowsey, chief executive of 1,000-strong pub chain Admiral Taverns, said the government was “frightening everybody into staying home but they’re not providing any support for the businesses that are most impacted”. Torsten Bell, head of the Resolution Foundation thinktank, told the Guardian: “Surging case rates mean economic pain for British firms, whether or not new restrictions are introduced. And either way the Treasury will have little choice but to introduce support for hard hit firms in the days ahead.” Senior Tory MPs also warned of the “devastating effect” that advising people to possibly skip social gatherings in the run up to Christmas would have on businesses, and demanded that “the loss of revenue is in some way made up to them”. The MPs claimed hundreds of thousands of workers could lose their jobs due to the hospitality sector being put into an “effective lockdown” with a “massive knock-on effect” that would hit high street retailers particularly hard. Steve Brine, a former health minister, insisted “the Treasury is going to have to do more”. Bowing to pressure, Sunak and the economic secretary to the Treasury, John Glen, held one-to-one calls with firms including Greene King, Nando’s and Prezzo, as well as UKHospitality, the British Chambers of Commerce and Federation of Small Businesses. A source told the Guardian that hospitality leaders had difficulty explaining to the Treasury how crucial the Christmas period was, with ministers seemingly unaware of how low takings usually are in January and February. Bosses of firms with central London venues are understood to have told Treasury ministers to act fast, warning decisions will be made in the next 24 hours about whether they can open on Monday, or whether venues will be mothballed for Christmas. The source said they were “cautiously optimistic” that the government will come up with a support package. Sunak said he knew it was a “very concerning time for businesses up and down the country” but stressed the situation this Christmas was different to last year when some were forced to close. He suggested any financial support may still be some time away, adding that he would consider their requests “over the coming days” and that there were existing measures in place to help struggling firms. Highlighting how people getting the vaccine would help avoid the need for more restrictions, the chancellor said all adults getting their booster was the best way to “keep safeguarding our economic recovery and the lives and livelihoods of the British people”. Jonathan Reynolds, the shadow business secretary, called Sunak’s absence from the UK an “insult to the British businesses and workers who have struggled to get to this point”. He said: “They are now facing closure by stealth from a government without the authority to take the public health measures required and back it up with economic support. Firms are clear in their message to government, they need help now not just warm words.” Days after the government’s “plan B” for dealing with Covid this winter was passed despite a huge Tory rebellion, attention in Whitehall is turning to whether any fresh restrictions may be implemented. Officials are understood to be examining the effects of guidance for England, similar to Scotland, which would advise limiting household mixing to three groups, starting from next week. Whitehall sources said contingency planning was under way but not yet at the stage of being presented to ministers. “Work is being done on options but at the moment there are no immediate plans to change course,” one official said. “But we do know with this virus that planning anything to announce, say, next week, is just not possible. It’s day by day.” Rain Newton-Smith, chief economist for the CBI, said: “Further support for struggling firms will be needed if fresh government public health measures prevent firms trading their way to recovery.”