Police activity in Rutland Avenue in Sefton Park, after an explosion at the Liverpool Women's Hospital killed one person and injured another on Sunday, in Liverpool, England, Nov 15, 2021. (PETER BYRNE / PA VIA AP)

Britain's terror threat level has been upgraded from "substantial" to "severe" following an explosion outside a Liverpool hospital that had been declared a terrorist incident on Monday.

The upgrade, confirmed by British Home Secretary Priti Patel, means further attacks are judged to be "highly likely."

"The Joint Terrorism Analysis Center are now increasing the UK's threat level from substantial to severe," Patel told local media.

"And there's a reason for that, and that reason is because what we saw yesterday is the second incident in a month."

Sunday's explosion outside Liverpool Women's Hospital was caused by "the ignition of an explosive device" that was brought into the vehicle by a male passenger, said Russ Jackson, chief of counter-terrorism unit in northwest England

The "severe" level is the second highest alert in Britain, whose five-level terrorism threat alert system consists of "low, moderate, substantial, severe and critical."

Sunday's explosion outside Liverpool Women's Hospital was caused by "the ignition of an explosive device" that was brought into the vehicle by a male passenger, said Russ Jackson, chief of counter-terrorism unit in northwest England.

The male passenger died in the explosion and the taxi driver managed to escape. Police identified the suspect as 32-year-old Emad Al Swealmeen.

Four men in their 20s have been arrested under the Terrorism Act.

The explosion occurred just before 11 am on Sunday, when a Remembrance Day service to commemorate war dead was being held at nearby Liverpool Cathedral. Police are investigating whether the events are connected.

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Police are searching two places associated with Al Swealmeen and have recovered significant items, Detective Chief Inspector Andrew Meeks said in a statement released by Greater Manchester Police.

"Now that we have released his name, any information that the public may have about Al Swealmeen, no matter how small, may be of great assistance to us," he said.

Jackson said it was unclear why the passenger had wanted to go to the hospital or what had caused the sudden explosion of the device.

Police also said they have recovered important evidence from an address at Rutland Avenue, adding it is becoming central to the investigation. Al Swealmeen had been picked up by the taxi from the Rutland Avenue area, according to the BBC.

The injured cab driver, who locked the passenger in the car during the incident, has been hailed a hero.

"The taxi driver, in his heroic efforts, has managed to divert what could have been an absolutely awful disaster at the hospital," said Liverpool Mayor Joanne Anderson.