The decision, which will be confirmed by Health Secretary Matt Hancock in a statement to the House of Commons later today (15 October), will mean households across the capital will be barred from mixing in any indoor setting including pubs, restaurants and bars.
Hospitality businesses will be able to continue operating under the 'high' risk tier, subject to the 10pm curfew currently imposed nationwide.
The decision will affect 3,640 pubs and 7,556 restaurants across London’s 32 boroughs and the City of London, according to analysis of official Government data by the real estate adviser Altus Group.
"Further restrictive measures which adversely impacts trade, already at far lower levels than before the pandemic, without any discerning targeted support, could be the death knell," says Robert Hayton, head of UK property tax at Altus Group.
Other areas set to move into the 'high' risk tier when the new restrictions come into force at midnight on Saturday (17 October) include Essex, Elmbridge, Erewash, Barrow-in-Furness, York, North East Derbyshire and Chesterfield.
Meanwhile, according to The Guardian, Prime Minister Boris Johnson is expected to sign off on the harshest tier 3 Coronavirus measures for millions more people in the north of England later today.
It is understood that Greater Manchester and Lancashire could join the Liverpool City Region in the 'very high' risk tier, which will mean pubs and bars will be ordered to close and social mixing between households will be banned indoors and outdoors.
Restaurants and any pubs or bars that are able to 'operate as if they were a restaurant' and serve 'substantial' meals will be allowed to remain open under the highest tier, though.
Reacting to the decision on London and Essex, trade body UKHospitality warned that moving London into Tier 2 will be catastrophic for its hospitality businesses, unless improved job support and grants are made available immediately.
It said that unless job support available under the 'very high' risk tier, which allows businesses to claim a grant covering two-thirds of employee's wages while they remain closed, is applied to those businesses in lower 'high' risk tier, the sector is facing widespread job losses within weeks.
“Being moved into Tier 2 is a curse for businesses," said Kate Nicholls, UKHospitality chief executive.
"They will be trapped in a no man’s land of being open, but with severe restrictions that will significantly hit custom, all while unable to access the job support available in tier three. It is the worst of both worlds for businesses.
“Venues in London have already taken a hit due to the dip in inbound tourism and with people increasingly working from home. A move into Tier 2 will now be catastrophic for some of them and it is only going to be made worse by the end of the furlough scheme in under two weeks.
“The Government must remove employer contributions from the Job Support Scheme for hospitality or apply Tier 3 job support to Tier 2 businesses. If it does not, we are looking at catastrophic businesses closures and widespread job losses in the capital as early as 1 November.”