Fast-growing UK companies will be offered £1.25bn in taxpayer-backed loans, as the government attempts to protect emerging sectors of the British economy during the coronavirus pandemic.

In the latest intervention to cushion the unfolding economic blow, the chancellor, Rishi Sunak, said the financial package would help support technology and life sciences firms so they could continue to develop innovative products, powering UK growth in future.

He said the mix of government loans, grants and private sector-matched funding would help companies access capital at a difficult moment, adding: “Our startups and businesses driving research and development are one of our great economic strengths, and will help power our growth out of the coronavirus crisis.”

The package comes on top of billions of pounds of support announced by Sunak to support businesses through the Covid-19 pandemic, as the government’s lockdown measures effectively shut down large chunks of the economy.

However, ministers have faced criticism for not moving quickly enough. Concerns have also been raised over gaps in the safety net, raising the risk of higher rates of business failures and unemployment across Britain.

The announcement comes on the day the government’s job retention scheme opens to applications, with the system expected to face significant demand as employers submit claims to furlough millions of workers.

The centrepiece of the latest financial package announced by the chancellor is a £500m loan scheme called the Future Fund, which will provide UK-based companies with between £125,000 and £5m from the government, with private investors at least matching the government commitment.

Distributed through the British Business Bank, the loans will convert into shares in the companies receiving them if they are not repaid. The government plans to offer £250m until the end of September before reviewing the scheme.

A further £750m of grants and loans will also be made available for UK companies involved in intensive research and development of new technologies, with funding channeled through Innovate UK, the government body for supporting business research projects.

The government said the innovation agency would “accelerate” up to £200m in payments to 2,500 existing customers, while £550m will also be made available to increase support to these firms.

About 1,200 hi-tech firms in Britain not in receipt of Innovate UK funding will be offered £175,000.