The government could bail out rail and tram networks in cities such as London and Manchester as soon as this week, as public transport revenues almost entirely disappear during the coronavirus lockdown.

Transport has been among the hardest-hit industries during the pandemic, with all but essential journeys banned and people across the UK urged to work from home where possible.

An announcement from the government could come “within days”, according to UK Tram, the lobby group representing Britain and Ireland’s 11 light railway systems. However, James Hammett, UK Tram’s managing director, added that there had been difficulties securing a deal because of the “differing contractual obligations under which networks operate”.

The Department for Transport (DfT) last month suspended rail franchising, in effect renationalising the rail industry to prevent its complete collapse during the crisis. It has also bailed out bus companies with £167m of funding over the next three months.

However, transport operated by local bodies – such as the London Underground, Manchester’s Metrolink and Liverpool’s Merseyrail – was not included in the previous bailouts. The bailout talks were first reported by the Financial Times.

London’s mayor, Sadiq Khan, told BBC Radio London on Tuesday the government was talking to Transport for London (TfL) and other public travel providers around the country about grant support. If it does not receive support TfL would have to consider cutting services and jobs, he said.

“We have cash reserves which we’re eating into,” he said. “Frankly speaking, because we’ve lost 95% of passengers on the tube, because we’ve lost 85% of passengers on buses, we’re struggling.”

A TfL spokesman said Khan was referring to TfL’s prudent “minimum cash balances” by the end of the month, which by then would still be £1.2bn. That would be sufficient for TfL to keep operating core transport and paying staff while talks continued.

The mayor of Greater Manchester, Andy Burnham, said the whole of the Metrolink system could be suspended if there was no money forthcoming, according to the Liverpool Echo on Tuesday. In Liverpool, demand for Merseyrail has fallen by 83% during the crisis.

In Manchester, Metrolink patronage is down by 95%, meaning the network will lose about £5.3m a month, even after the cost savings. On 13 April Metrolink made just £8,900, compared with £480,000 on 2 March before lockdown restrictions were imposed.

TfL has reported that daily revenues are down by 90%. At the same time, it has temporarily suspended the congestion charge and emissions charges, putting further pressure on the body’s finances, a spokesman said.

Advertising revenues have fallen to a “negligible amount”, the spokesman said, while the body has given 100% rent relief to tenants in its properties for three months.

The government is understood to be in regular contact with operators about their financial difficulties.

A DfT spokeswoman said: “We are aware of the challenges faced by transport operators, and continue to work closely with the sector and transport authorities to ensure passengers can make essential journeys.”