A third of small businesses have been given cash grants to survive during the coronavirus crisis, Chancellor Rishi Sunak said.

He added that between £3 billion and £4 billion has already been handed out by local authorities, but ministers were urging councils to speed up payments.

Mr Sunak also said that HM Revenue and Customs (HMRC) has completed its new payroll system to deal with the Government’s furlough scheme and entered a testing phase, ready to launch on April 20.

Businesses and workers are keen to ensure they can return to normal after the lockdown, but need access to loans and cash to survive, including companies who need to pay staff at the end of the month.

Their fears were heightened after the Office for Budget Responsibility (OBR) published a report saying UK GDP could fall 35% between April and July, but bounce back by the end of the year.

Mr Sunak declined to say whether the Government agrees with the forecast, which assumed a lockdown of three months, followed by three months of a partial lockdown.

But he did point out that the Government’s financial packages were helping to avoid longer-term economic hits and recognised that borrowing will soar.

Access to funds is proving difficult for some businesses but the Chancellor said there had been improvements in loan application processing – an issue hitting several countries dealing with the economic impact from Covid-19.

Mr Sunak added he remains in regular contact with the chief executives of the major UK high street banks and thinks “there has been enormous improvement to where we were last week” over loan speeds.

They will also be able to access a new system for accessing cash to pay workers who have been furloughed, which the Chancellor said was now in a testing phase.

He said: “We’ve never had something like this in the UK before. It potentially might cover millions of people and we had to build a brand new system from scratch to handle that.”

The system is expected to launch on April 20 for applications and will go through “several days” of fraud and back office checks before being released.

When asked how the extra costs to the public purse will be funded – either through tax rises, pension cuts or further austerity measures – he said the Tories’ “levelling up” agenda would “still be a critical part of how we get back to normal here”.