The government has given Greater Manchester until midday tomorrow to reach an agreement on entering Tier 3 restrictions.
Communities Secretary Robert Jenrick said 10 days of discussions in "good faith" have not resulted in an agreement – and he warned that the prime minister would have to intervene if no deal is made by the deadline.
Greater Manchester mayor Andy Burnham and other local leaders have been demanding further economic support for businesses that would be affected by the region entering the highest level of COVID-19 measures.
And, in an increasingly bitter political row, further talks on Monday failed to end in an accord.
Setting the Tuesday deadline for an agreement, Mr Jenrick said late on Monday night: "The public health situation in Greater Manchester continues to deteriorate.
"We've now had 10 days of discussions, in good faith, with local leaders in Greater Manchester. We've not so far been able to reach an agreement.
"We've offered a comprehensive package of support, in addition to the national measures that have been set out by the chancellor.
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"I've written this evening to the mayor of Greater Manchester and to local leaders in the city region to say that, if we're not able to reach an agreement by noon tomorrow, then – with deep regret – I'll have to advise the prime minister that we're not able to reach an agreement at this time."
Asked whether the continued absence of an agreement by the deadline would then result in the government imposing Tier 3 restrictions on Greater Manchester, Mr Jenrick replied: "That's a matter for the prime minister to decide."
The cabinet minister said the government had offered a financial package "proportionate" to the support provided to Lancashire and the Liverpool City Region – the first two areas of England to enter Tier 3 restrictions.
"Local leaders have not, so far, been willing to take us up on those proposals," he added.
Mr Jenrick warned that Greater Manchester was facing a "very serious situation" and said that local leaders "recognise the gravity of what's happening on the ground".
"There are now more COVID-19 patients in hospitals in Greater Manchester than the whole of the South East and the South West combined," he said.
Responding to Mr Jenrick, Sir Richard Leese, the leader of Manchester City Council, said he still hoped it would be possible to find an agreed way forward in the hours remaining, but conceded that if ministers imposed Tier 3 restrictions the city would have little choice but to comply.
Speaking on BBC2's Newsnight he said: "I am hoping that tomorrow (Tuesday) morning we will be able to sit down again with ministers and come to an agreement which will serve the best interests of the people of Manchester.
"Clearly if Government imposes Tier 3 – and I hope that won't happen – we will clearly need to comply with that."
Mr Burnham and Sir Richard had earlier accused Downing Street of using "selective statistics" to raise fears about the ability of the region's hospitals to cope with COVID-19 patients.
Number 10 had suggested Greater Manchester's intensive care capacity could be overwhelmed with coronavirus cases by 12 November, amid a recent tripling in the number of cases in over-60s and a doubling in hospital admissions every nine days.
But, in a joint statement Mr Burnham and Sir Richard said: "We are disappointed that the government has today sought to raise public concern about the NHS in Greater Manchester with selective statistics.
"Greater Manchester's ICU occupancy rate is not abnormal for this time of year and is comparable to the occupancy rate in October 2019.
"Also, providing information about individual hospitals does not reflect that our hospitals work as a system to manage demand.
"We are not complacent about the position in our hospitals and are monitoring the situation closely.
"But in the current situation, we believe it is essential that our residents are given clear, accurate information about the state of the NHS in Greater Manchester and that public fears are not raised unnecessarily."
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Professor Jane Eddleston, Greater Manchester's medical lead for the coronavirus response, said the region faced a "serious situation" but stressed hospitals were "not overwhelmed".
She also encouraged patients to continue comingRead More – Source