An explosion outside Liverpool Women's Hospital on Remembrance Sunday has been declared a terror incident by police.

The suspected attacker died when a homemade bomb exploded in a taxi outside the hospital, while the injured driver - named locally as David Perry - escaped before the car caught fire.

The passenger is not believed to have been known to MI5, according to BBC security correspondent Gordon Corera.

The UK terror threat level has been raised to severe.

Home Secretary Priti Patel said it had been raised from substantial to severe, meaning an attack is highly likely, because the explosion in Liverpool was the second incident in a month.

Four men have been arrested in the city under the Terrorism Act.

Police have confirmed a controlled explosion was carried out as a precaution in the Sefton Park area at about 16:00 GMT as part of the investigation.

Frances Evans, who witnessed the explosion, told BBC News that three police vans and a little black van had pulled up before covering an unknown item.

"They weren't there long, probably 20 minutes max," she said. "I saw the explosion, the smoke and heard the bang."

Head of Counter Terrorism Policing North West, Russ Jackson, said the taxi passenger appeared to have made an "improvised explosive device" which caused the blast just before 11:00 on Sunday.

He said police knew the identity of the attacker but would not confirm his name at this stage.

The man's motivation was "yet to be understood", Assistant Chief Constable Jackson added.

Prime Minister Boris Johnson, who chaired an emergency Cobra meeting earlier in response to the explosion, described it as a "sickening attack".

He said it was a "stark reminder for all of us to remain vigilant", but added "the British people will never be cowed by terrorism".

Mr Jackson said he understood Delta Taxis driver Mr Perry picked up a passenger in Rutland Avenue, near Sefton Park, on Sunday.

"The fare - a man - had asked to be taken to Liverpool Women's Hospital, which was about 10 minutes away," he added.

"As the taxi approached the drop-off point at the hospital an explosion occurred from within the car. This quickly engulfed it in flames.

"Remarkably the taxi driver escaped from the cab."

Posting on Facebook, Mr Perry's wife Rachel said he was "lucky to be alive".

"The explosion happened whilst he was in the car and how he managed to escape is an utter miracle," she added.

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Mr Jackson said the taxi driver had been released from hospital after being treated for his injuries.

He said police were "aware there were Remembrance events just a short distance away from the hospital and that the ignition occurred shortly before 11:00 GMT".

"We cannot at this time draw any connection with this but it is a line of inquiry we are pursuing," he added.

While the police believe they know who the attacker was, difficult forensic work may be continuing to confirm the identity - particularly if experts have to resort to dental records and DNA.

Digital forensic teams investigate the dead man's online habits and contacts. Officers will want to build a picture of his movements from mobile phone data and financial transactions.

Bomb experts will be looking at how the device was made.

These strands may lead detectives to vital CCTV evidence and locations or witnesses that will help reveal the attacker's planning.

But the biggest priority will be to establish - if possible - whether there is any ongoing threat to the public.

Presentational grey line

Police said a fourth man, aged 20, was arrested earlier in the Kensington area of the city and was in custody.

Three other men - aged 21, 26 and 29 - were detained on Sunday in Sutcliffe Street in Kensington.

Mr Jackson said the arrested men were believed to be "associates" of the taxi passenger.

He said officers were looking at the man's associates, his telephone records and purchases he may have made.

All four men in custody will be interviewed later by counter-terrorism detectives.

Officers are searching two addresses - one in Sutcliffe Street and a second at Rutland Avenue where "significant items" have been found, police said.

A cordon is in place at both locations and eight families have been evacuated from their homes.

Mr Jackson said police had "attributed" the taxi passenger to both the addresses but were uncertain which one he lived at.

Neighbour Sharon Cullen said she was evacuated from her home near Sutcliffe Street by officers telling her "whatever is going on at the back of the house, it could blow the block".

The home secretary said the explosion had a "very significant impact across the community" in Liverpool and her thoughts were with people in the city.

She said the government would "continue to work with everyone when it comes to the security of our country and making sure that we're taking all the necessary steps required".

Assessments of threat levels are taken by the Joint Terrorism Analysis Centre (JTAC), part of MI5, which makes recommendations independently from the government.

A severe threat is classed as an attack on the UK being "highly likely" and is the second highest alert below critical, which means an attack is "highly likely in the near future". (BBC)

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