Penny Mordaunt, the Commons Leader, became the first to declare, with both Rishi Sunak and Boris Johnson expected to formally announce that they will join her in the race.

Allies of Mr Johnson said that the former prime minister was “up for it”, while backers of the former-chancellor said that he was the only credible choice to restore confidence in the economy.

The potential return of Mr Johnson has prompted alarm by senior figures within the party, with one predicting that it would see resignations, by-elections and defections to the Labour Party as a result.

(COMBO) In this combination of file pictures created in London on October 21, 2022, Britain's Prime Minister Boris Johnson (R), listens to a question from the media as he attends a press conference at Downing Street in London on March 7, 2022, and Britain's Chancellor of the Exchequer Rishi Sunak (L) speaking at the annual Conservative Party Conference being held at the Manchester Central convention centre on October 4, 2021. - Former Conservative leader Boris Johnson and his former Chancellor of the Exchequer Rishi Sunak are neck and neck in the betting as the main candidates explore their options with a week to go in the Conservative leadership election. (Photo by Alberto Pezzali and Ben STANSALL / various sources / AFP) (Photo by ALBERTO PEZZALI,BEN STANSALL/AFP via Getty Images)

It came as fresh polling showed that Labour had extended their lead with the pollster YouGov to a record 37 points, with Sir Keir Starmer’s party reaching 56 per cent of the vote, compared to only 19 per cent for the Conservatives.

It comes after Liz Truss resigned on Thursday following weeks of U-turns, disastrous polling, and crisis in both the markets and financial discipline.

Nominations for the leadership which opened following her resignation require MPs to get the backing of 100 of their colleagues, with voting due to close on Monday.

After which, if there are two candidates remaining, they will be put to the Tory party membership in an online vote, with the winner becoming the third Conservative prime minister since the 2019 general election.

Downing Street yesterday confirmed that the medium term fiscal plan on Halloween could be delayed, with the decision left up to the new prime minister over the best course of action.

However former Bank of England deputy governor Professor Sir Charlie Bean warned the new incumbent would have no choice but to stick with it if they were to avoid the turmoil which followed Kwasi Kwarteng’s now abandoned mini-budget.

The pound yesterday slid to its lowest level this week as downbeat economic data and the prospect of political uncertainty increased nervousness in the financial markets.

Earlier on Friday, official figures showed that Government borrowing struck £20 billion last month, more than £2 billion more than economists had expected.

Meanwhile, the Office for National Statistics revealed that retail sales slipped by 1.4 per cent last month, which was notably worse than the 0.5 per cent decline a consensus of experts had predicted.

Tory leadership contest steps up as three main candidates emerge