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The chancellor has unveiled a raft of measures intended to keep firms afloat in the coming years as the economy struggles to rebound from its largest contraction in more than three centuries thanks to the carnage caused by the covid-19 pandemic.

Stark economic forecasts published alongside the budget by the Office for Budget Responsibility revealed the economy will contract by 11.3% this year, the largest fall in output for more than 300 years, because of the pandemic.

Total spending on tackling the virus has so far hit 拢280bn with a further 拢55bn to be shelled out next year.

Borrowing this year is set to hit 拢395bn this year, the highest recorded figure in the UK鈥檚 peacetime history. It will hit 97.5% of GDP in 2025-26.

Rishi Sunak said the 鈥渃ost of inaction [over covid] would have been far higher鈥� but warned the current level of borrowing was 鈥渃learly unsustainable鈥�.

And he said the number of people set to be thrown out of work by by the pandemic would jump to 2.6 million by the middle of next year. The latest figure is 1.62 million, a rise of 300,000 on last year.

Output is not expected to return to pre-crisis levels until the fourth quarter of 2022, with growth projected to be 5.5% next year and 6.6% the year after.

Sunak (pictured delivering his Spending Review statement to MPs this afternoon) said capital spending will total 拢100bn next year, 拢27bn more than in 2020 as he promised to continue funnelling government funds into the construction sector.

He announced a 拢7.1bn National Home 好色先生TV fund which will run over four years and would see up to 860,000 homes built.

It will be on top of the 拢12.2bn affordable homes programme announced earlier this year and will include 拢4.8bn of capital grant funding for land remediation, infrastructure investment and land assembly, as well as 拢2.2bn of new loan finance to support housebuilders.

Spending rules for local authorities will be relaxed, allowing them to increase spending by up to 4.5%, while a new 拢4.4bn 鈥榣evelling up鈥� fund was announced which local areas will be able to use to bankroll local projects.

The fund will be managed by the Treasury, the Department of Transport and MHCLG with Sunak promising it will take 鈥渁 new holistic place based approach to the needs of local areas鈥�.

Projects expected to be funded include new roads, upgrades to railway stations, improvements to high streets and town centres along with new libraries, museums and galleries.

But Sunak said that projects must be delivered within this parliament and be considered to 鈥渉ave a real impact鈥�command[ing] local support鈥� including the backing of local MPs.

He also announced the launch of a new UK Infrastructure Bank which will work with the private sector to finance major new investment projects across the UK.

The bank, which has been created partially to replace the European Investment Bank which the UK will leave at the end of the Brexit transition period on 31 December this year, will be based in the north of England and will open next spring.

The idea was suggested by chair of the National Infrastructure Commission John Armitt, who said it could start with base funding of 拢20bn.

Other measures include improvements to the way the apprenticeship system works for businesses and extensions to traineeships.

Sunak also earmarked an extra 拢30m to help deliver the new building safety regime due to come into force in 2023, taking funding to at least 拢70m ove the 2021/22 spending period. It will also include money for a new building safety regulator.