Ministers are continuing talks with the Treasury over extending financial support to Covid-hit businesses, amid Labour warnings of a £50 billion “bombshell” emerging if no action is taken.

Business Secretary Kwasi Kwarteng told MPs he is working with Chancellor Rishi Sunak on “what further support we can supply” following calls to extend the business rates break beyond March.

His ministerial colleague Paul Scully acknowledged firms have raised concerns over a “cliff-edge” and also over fixed costs they have to deal with, adding: “All of which we recognise, and (we are) continuing our conversations with the Treasury.”

Both Mr Kwarteng and Mr Scully said a “flexible” approach to financial support is needed to help firms.

Labour accused Mr Kwarteng of being “all mouth and no trousers” and pressed for an extension to business rates relief and furlough.

Retailers, leisure and hospitality firms have not had to pay rates for the current financial year after the Government launched a rates holiday at the onset of the pandemic.

However, the property tax is currently set to restart in April for the new financial year despite non-essential retailers remaining shut due to lockdown restrictions.

Speaking in the Commons, Conservative Caroline Ansell (Eastbourne) warned of a “potential perfect storm” for the hospitality sector as she called on the Government to look at extending the 5% VAT rate, furlough and the business rates holiday amid the pandemic.

She said: “The Government has provided life support to the hospitality sector but my hoteliers are flagging that we are moving into a potential perfect storm of deferred payments coming into focus and support schemes set to close.”

And she added: “Can I ask the minister to look also at extending the 5% VAT rate, furlough and the business rates holiday so the hospitality sector in my constituency of Eastbourne and across the country can come back all the stronger.”

Responding, Mr Kwarteng said: “In terms of the other measures she mentions, I’m in constant dialogue with the Chancellor, we’re looking at the economy, the situation evolving daily, minute by minute almost, and we hope that we can provide the flexible support that we have done in the last year.”

Shadow business minister Lucy Powell earlier said: “I’ve listened to the Secretary of State’s (Kwasi Kwarteng) answers so far and I’m afraid he’s all mouth and no trousers, so let’s try again.

“Businesses face a £50 billion bombshell in April, yet many in hospitality, retail and services won’t even be open by then. Councils are sending out business rate bills as we speak and difficult decisions are being made now.

“So does he agree personally with Labour’s plan to extend business rate holidays for at least six months, and the furlough while public health measures remain, to deal with this bombshell before it blows a big hole in our economy?”

Mr Kwarteng swapped seats with Mr Scully midway through the question.

Mr Scully replied to Ms Powell: “I’m glad she has been listening to the same businesses that I have been for the last year when they’ve talked about the cliff-edge that they faced, fixed costs – whether they be business rates, VAT, the rent moratorium, all of which we recognise and continuing our conversations with the Treasury.

“Because it’s so important as we reopen the economy, as we look to get customers back to a safe and warm welcome to retail and hospitality, that we have a flexible approach to our financial support as well to tackle this difficult period.”

Earlier, SNP MP David Linden (Glasgow East) said: “Almost 24,000 retail, hospitality and leisure businesses in Scotland are currently supported by 100% rates relief. That support has been extended until the end of July. The Scottish Government wants to go further and Scottish businesses need us to go further.

“But due to borrowing constraints placed on Scotland’s Parliament the funding necessary to extend further can only come from the UK Government. So does the Secretary of State agree that his Government should step up and fund this relief for another year?”

Mr Kwarteng, in his reply, said: “I’m in regular contact with the Chancellor, he has had a nimble approach and I look forward to engaging with him on what further support we can supply.”