Chancellor Rishi Sunak predicted extended the furlough scheme by a further month would provide "certainty for millions of jobs and businesses".

And while business leaders welcomed the decision, they warned more support packages will be needed heading into 2021 to enable many firms to survive.

Mr Sunak, who also announced government-guaranteed coronavirus business loan schemes would continue to the end of March and the Budget will be held on March 3, brought forward an announcement on a review of the furlough scheme which was due next month

He said: "We know the premium businesses place on certainty, so it is right that we enable them to plan ahead regardless of the path the virus takes, which is why we're providing certainty and clarity by extending this support."

Federation of Small Businesses national chairman Mike Cherry said the extension was a step forward, but called for a pro-business Budget.

He said: "Small businesses are facing one of the bleakest winters on record, so extending full, flexible furlough to the end of April is a positive move as they try to navigate a tougher than normal January and February.

"While helpful, furlough does not reduce the cost per hour of employing someone still working and does not protect against the huge range of other fixed costs threatening to push them under before restrictions are lifted.

"It is reassuring to see the extension of the emergency loan application window, giving the Government the breathing room it needs to work with the banks and FSB on creating a successor scheme that is ambitious in scope and accessible to small businesses - not just larger firms."

He said the Government must review urgent priorities before the Budget.

"The newly self-employed, owner directors and suppliers are facing the bleakest of winters, but FSB's proposals to create a new Director Income Support Scheme could allay some of their immediate anxieties," he said.

"To promote job retention and creation, the Government should look at firms who are able to recruit by lowering national insurance costs or by expanding the Kickstart scheme to more vulnerable groups.

"There's never been a more important time for the Chancellor to deliver a pro-business, pro-growth budget in 2021 - one which doesn't create new costs for businesses just as they're trying to get back on their feet, but instead charts a course to economic recovery."

Emma McClarkin, chief executive of the British Beer and Pub Association, also called for more support for the hard-hit hospitality sector.

She said: "I hope the Government will now turn its focus to a support package to protect hospitality businesses as well as committing to a roadmap out of this crisis in line with the vaccine rollout.

"Pubs and brewers need enhanced grant support, extended business rates holidays and VAT reductions and a cut to the rate of tax on beer.

"It is only with that kind of backing that Britain's brewers and pubs will be in a position to reopen, continue to employ all those staff currently furloughed and help lead the much-needed economic recovery."

CBI chief economist Rain Newton-Smith said the decision will bring some much-needed certainty.

She said: "In early 2021, businesses will likely need clarity about the level of support beyond the Spring to build a bridge to economic recovery.

"Working with firms to evolve the furlough scheme, support cashflow and avoid cliff-edges in other schemes like tax deferrals, grants and business rates holidays, will be essential early in the new year."