The decision by Boris Johnson follows days of increasingly fraught discussions with Mayor of Greater Manchester Andy Burnham over the level of financial support businesses forced to close would receive.

The discussions concluded without an agreement and with Johnson announcing that Greater Manchester will move from local Covid alert level “high” to “very high”.

Under tier three rules pubs and bars not serving substantial meals have to close, while household mixing is banned indoors and outdoors in hospitality settings and private gardens.

Betting shops, casinos, bingo halls, adult gaming centres and soft play areas will also have to close, while there is guidance against travelling in or out of the area.

The government said that infection rates in Greater Manchester were among the highest in the country. As of 12 October, the weekly average for new cases was 1,591, an increase of 302% in one month since 12 September.

Johnson said “not to act now” would put the lives of Manchester’s residents “at risk”.

He said a “generous” offer of financial support had been made to the region but that Mayor Andy Burnham had refused it.

Burnham initially sought £90m in support for businesses and staff affected by the tier 3 measures, later lowering the request to £75m, and then £65m. Johnson offered £60m.

The talks collapsed and the government said it was providing a £22m funding package for the region. Health secretary Matt Hancock said the £60m was still “on the table” with the government open to further discussions with local leaders.

Burnham said that without a minimum of £65m in additional business support, tighter measures “would be certain to increase levels of poverty, homelessness and hardship” among the region’s 2.8 million population.

The funding is in addition to Jobs Support Scheme set out by chancellor Rishi Sunak earlier this month, which will pay up to two-thirds of employees’ wages for businesses required to close and provide grants worth up to £3,000 per month.

At the moment only Liverpool City Region and parts of Lancashire are in tier 3. South Yorkshire will move into tier 3 on Saturday, alongside Greater Manchester.