Theresa May has raised Britain's security threat level from "severe" to "critical", meaning further attacks may be imminent.
The announcement by the UK prime minister came just hours after police identified 22-year-old Salman Abedi as the person who carried out Monday's deadly suicide bombing in Manchester that left 22 people dead.
An improvised explosive device went off as thousands of mostly young fans streamed out of Manchester Arena in the northern English city at the end of US artist Ariana Grande's performance, police said.
In her speech late on Tuesday, May said "it is a possibility" that the government "cannot ignore that there is a wider group of individuals linked to this attack".
"It is now concluded on the basis of today's investigations that the threat level should be increased for the time being," she said.
Earlier, Ian Hopkins of the Greater Manchester Police confirmed the identity as the attacker, adding that police had raided two residential areas in Manchester and carried out a controlled explosion at one of them as part of the investigation.
At one of the scenes, where armed police raided an apartment, heavily armed men were guarding what one resident described as a "very, very quiet" area.
Plain-clothed officers wearing gloves removed bags from the apartment.
The area in south Manchester, home to a number of tidy-looking buildings, is less than a mile from the supermarket where police reportedly arrested a 23-year-old man in connection with the attack.
Neighbours said the complex of three buildings was a mixed area of students, singles and families, with a large South Asian population.
Al Jazeera's Barnaby Phillips, reporting from Manchester, said it appeared that the attack was carried out with "more planning and more sophistication", in comparison with the attack on parliament in London in March.
The Islamic State of Iraq and the Levant (ISIL) group claimed responsibility through its social media channels for the attack, saying "one of the caliphate's soldiers placed bombs among the crowds".
Thousands gathered in Manchester on Tuesday for a multi-faith vigil [Shafik Mandhai/Al Jazeera]
Chaos and panic
The explosion, which caused scenes of chaos and panic and sent screaming families and children fleeing, also wounded at least 59 concert-goers, many of whom are in critical condition.
Al Jazeera's Nadim Baba, also reporting from Manchester, said that about 12 of the 59 victims brought to hospitals were children.
At least one of the fatalities was an eight-year-old child, he said, underscoring the "severe security threat" the country faced.
For her part, May denounced the "callous terrorist attack" that she labelled as "among the worst terrorism we have experienced in the United Kingdom".
In her condemnation, Queen Elizabeth described the bombing as an "act of barbarity".
The attack has been described as the deadliest in Britain since four men killed 52 people in suicide bombings on London's transport system in July 2005.
Speaking to Al Jazeera, Martin Reardon, a security analyst and former FBI agent, said that as ISIL, also known as ISIS, loses ground in the Middle East, fighters are likely to stage more attacks in Europe.
|There was heavy presence of police and armed officers in Manchester's city centre [Shafik Mandhai/Al Jazeera]|
The bombing also came in the lead-up to the June 8 general election in the UK.
Earlier on Tuesday, UK politicians said they were suspending election campaigning until further notice.
Al Jazeera's Shafik Mandhai, reporting from Manchester on Tuesday, said the area near the train station and sports arena - the site of the attack - remained locked off by police officers.
"The area is a commuter hub, not only for workers within the city but also for those coming from towns nearby. But today, with the exception of journalists and curious locals, it is very quiet," he said.
He also reported of "heavy presence of police and armed officers."
"Throughout the day, local shopkeepers have been arriving to give officers on guard drinks and snacks," Al Jazeera's Mandhai said.
Later on Tuesday, thousands attended a vigil in Manchester's Albert Square to honour the victims, he said.
"Crowds easily filled the square with people spilling out on to the neighbouring streets," he reported.
Chris, one of those who attended the vigil, told Al Jazeera he wanted to send a message to those responsible for the attack.
"We are not scared, we are not scared of anyone in the city," he said. "There are always bad eggs. But for every bad one, there are millions of good ones."
Manchester, Britain's third biggest city, was hit in 1996 by a massive car bomb planted at a shopping centre by the Irish Republican Army (IRA) that wounded more than 200 people.
Source: Al Jazeera and news agencies