The decline of local journalism is a threat to democracy and is fuelling the rise in fake news, Theresa May said while launching a review into whether state intervention was needed to preserve national and local newspapers.

The investigation is set to examine the rise of low-quality “clickbait” news and whether more could be done by either the industry or government to undermine commercial incentives to produce such content.

Speaking in Manchester to mark 100 years since the Representation of the People Act, which extended the vote to all men over 21 and some women over the age of 30, May said advances in modern technology were having “a profound impact on one of the cornerstones of our public debate – our free press”.

The review will examine the supply chain for digital advertisers and whether content creators, rather than platforms, are getting enough of the revenue. May said the review would examine “whether industry or government-led solutions” were needed to help tackle the issue.

The prime minister, wearing a purple jacket and suffragette pin, called journalism “a huge force for good” but said its existence was under threat. “Good quality journalism provides us with the information and analysis we need to inform our viewpoints and conduct a genuine discussion,” she said. “But in recent years, especially in local journalism, we have seen falling circulations, a hollowing-out of local newsrooms and fears for the future sustainability of high-quality journalism.”

May said that more than 200 local papers had closed since 2005, naming several in Greater Manchester including the Salford Advertiser, Trafford Advertiser and Wilmslow Express. About two-thirds of local authority areas do not have a daily local newspaper.

“This is dangerous for our democracy. When trusted and credible news sources decline, we can become vulnerable to news which is untrustworthy,” she said. “So to address this challenge to our public debate we will launch a review to examine the sustainability of our national and local press. It will look at the different business models for high-quality journalism.”

May said the review would consider whether “the creators of content are getting their fair share of the advertisement revenue” from the articles they produced. “Digital advertising is now one of the essential sources of revenue for newspapers, the review will analyse how that supply chain operates,” she said. “A free press is one of the foundations on which our democracy is built and it must be preserved.”

The culture minister, Matt Hancock, said the review would investigate the overall health of the news media, the range of news available and how the press was adapting to the new digital market, including the role of platforms like Facebook and Google.

In a statement after May’s speech, Hancock said the industry was facing “an uncertain future” and the review would ensure the UK did not lose a vibrant, independent and plural free press. Hancock said it would examine “clickbait” news to consider if action needed to be taken to reduce its commercial incentive.

The review would also examine how data created or owned by news publications was collected and distributed by online platforms.

David Dinsmore, chair of the News Media Association, said he welcomed the plans: “This review acknowledges the importance of journalism in a democratic society, the vital role that the press takes in holding the powerful to account and producing verified news which informs the public. Viable business models must be found that ensure a wide variety of media are able to have a long and healthy future.”

A panel of experts will be appointed to lead the review in the coming months, with a final report expected early 2019.