The new mutated coronavirus strain is 70% more infectious than anything seen up to this point in the pandemic, Boris Johnson said.
The Prime Minister today plunged 17.7 million people into a new Tier 4 as concern rises over the variant.
People in London and the South East have to cancel Christmas plans and stay at home over the festive period, with non-essential shops set to close.
Those in the three lowest tiers can continue to join two other households indoors, but only on Christmas Day.
Mr Johnson told the Downing Street briefing: "It seems that this spread is now being driven by the new variant of the virus that we spoke about earlier this week.
"Our advisers on the New and Emerging Respiratory Virus Threats Advisory Group (Nervtag) have spent the last few days analysing this new variant - there's no evidence that it causes more severe illness or higher mortality but it does appear to be passed on significantly more quickly.
"Nervtag early analysis suggests the new variant could increase the R by 0.4 or more and although there is considerable uncertainty it may be up to 70% more transmissible then the old variant."
He said the virus is "spreading very fast" and said the government was bound to act on this information.
Sir Patrick Vallance said that three questions needed to be asked about the new variant of coronavirus; whether it could be transmitted more readily, if it made people sicker, and whether it altered the immune response caused by vaccines.
He said the variant, which was thought to have emerged in mid-September in London or Kent, had a "significant substantial increase in transmissibility".
Sir Patrick added that by December over 60% of infections in the capital had been the new variant, saying: "It moves fast and is becoming the dominant variant."
He said that there was no evidence that the new variant "causes more trouble" and would make people sicker.
Sir Patrick added there were "theoretical reasons" to suggest that it may alter an immune response though there was no evidence for this.
"Our working assumption from all the scientists is that the vaccine response should be adequate for this virus," he told the Downing Street press conference.
"We need to keep vigilant about this."
Earlier today Prof Chris Whitty said in a statement: "As announced on Monday, the UK has identified a new variant of Covid-19 through Public Health England's genomic surveillance.
"As a result of the rapid spread of the new variant, preliminary modelling data and rapidly rising incidence rates in the South East, the New and Emerging Respiratory Virus Threats Advisory Group (NERVTAG) now consider that the new strain can spread more quickly.
"We have alerted the World Health Organisation and are continuing to analyse the available data to improve our understanding."
