Rishi Sunak, former chancellor, was on Monday on course to become Britain’s new prime minister, after Boris Johnson quit the contest on Sunday night and markets heaved a sigh of relief.

Sterling rose on Monday after the risks of further immediate political and economic upheaval receded. Johnson, who was struggling to win support, admitted that if he had won he could not have governed “effectively” because of splits among Tory MPs.

Sunak will become Tory leader at 2pm on Monday if Penny Mordaunt, leader of the House of Commons and his only remaining rival, fails to win the 100 nominations from Tory MPs needed to enter the contest.

According to the FT’s tracker of publicly declared nominations, Mordaunt has so far received only 25 public backers. Some of her colleagues urged her to fold her campaign and back Sunak after Johnson pulled out of the race.

“Some of us think she should fold in behind Rishi as soon as possible in the interests of unity and stability,” said one MP backing Mordaunt.

Despite the small number of public supporters, a campaign official on Monday claimed Mordaunt had passed 90 nominations. “For the sake of the party, it’s important our members have their say,” she added.

Sunak’s campaign was further bolstered on Monday morning by the endorsements of two senior Tories: Michael Gove, former levelling up secretary, and former home secretary Priti Patel.

Meanwhile, Welsh secretary Robert Buckland, Northern Ireland secretary Chris Heaton-Harris and levelling up secretary Simon Clarke also threw their support behind Sunak.

Mark Francois, leader of the European Research Group of pro-Brexit backbench Tory MPs, on Monday said the group had decided not to back either Mordaunt or Sunak but would support the next party leader.

If he does end up as the only candidate with 100 nominations, Sunak is expected to be invited to form a government by King Charles later on Monday, replacing Liz Truss in Number 10.

However, if Mordaunt reaches the required threshold, MPs will hold an “indicative vote” later on Monday to send a signal to party members about which of the two candidates they want to see win the contest. Voting would then move to party members in an online ballot, with the result announced on Friday.

Sunak remains a divisive figure in the party and is blamed by many Tory MPs and party members for helping topple Johnson in July.

Veteran Tory and Johnson backer Sir Christopher Chope argued that a general election was now the “only answer” to restoring political credibility.

“The party is ungovernable in the House of Commons and so we’re going to have continuing rebellions as we try to change policies and so on,” he told BBC Radio 4’s Today programme.

But Sunak is seen by the markets as being committed to sound economic management — a new debt-cutting plan is set to be announced by chancellor Jeremy Hunt on October 31 — and more likely to oversee better relations with the EU than Johnson.

Sterling kicked off the week on a strong note after Johnson dropped out of the contest. The pound gained 0.3 per cent against the dollar to reach $1.1336 in morning trading in London, and advanced 0.6 per cent against the euro to €1.1525.

Ulrich Leuchtmann, head of currency research at Commerzbank, said Johnson’s exit removed one of the political risks that had been hanging over the UK currency. He said Johnson’s return to the premiership could have prompted a flare-up in tensions with Europe over post-Brexit agreements.

Johnson startled his team at 9pm on Sunday night by announcing he would not run for the leadership, even though he claimed he had the 100 nominations — plus a proposer and seconder — to enter the contest.

Many Tory MPs were highly sceptical that Johnson had the numbers. On Sunday, the number of declared backers for the former prime minister was stuck at little more than 50.

Johnson claimed he could have won the contest because of his appeal to the party membership but that he had stood aside in the interests of the Conservative party and the nation.

“There is a very good chance that I would be successful in the election with Conservative party members,” he said. “But in the course of the last days I have sadly come to the conclusion that this would simply not be the right thing to do. You can’t govern effectively unless you have a united party in parliament.”