Boris Johnson is said to be lining up an astonishing tilt at returning to Downing Street following the dramatic resignation of Liz Truss.

An election will take place and a new Tory leader and Prime Minister will be in place by Friday 28 October ahead of the fiscal statement three days later.

Confirmation of the short election campaign came from Sir Graham Brady, chairman of the Tory backbech 1922 Committee following the resignation of Liz Truss at 1.30pm after just 44 days in office.

Chancellor Jeremy Hunt ruled himself out, leaving Rishi Sunak and Penny Mordaunt – defeated rivals in the summer leadership contest – as clear favourites. However, Boris Johnson, who was toppled in the summer, could throw his hat in the ring.

UPDATE: Boris takes early lead in race for Downing St

“I hope you enjoyed your holiday boss. Time to come back,” one Conservative lawmaker, James Duddridge, said on Twitter. “Few issues at the office that need addressing. #bringbackboris”.

However, Mr Johnson, still faces an investigation into whether he misled parliament after he and his staff held a string of parties during COVID-19 lockdowns, and this could dissuade many MPs from backing him.

Mr Sunak has been the bookies’ favourite for some time, but he has his opponents on the backbenchers.

Commons Leader Ms Mordaunt said: “I am going to keep calm and carry on – and I would suggest everyone else do the same.”

Sir Graham told reporters: “I have spoken to the party chairman Jake Berry and he has confirmed that it will be possible to conduct a ballot and conclude a leadership election by Friday, October 28th.

“So we should have a new leader in place before the fiscal statement which will take place on the 31st.”

The government will hope that the tight timescale and election before the Chancellor delivers his medium term fiscal plan will help calm the markets.

While there is no certainty that Mr Hunt will deliver the statement, it is unlikely that a new PM would make a change with only the weekend to prepare for what becomes an increasingly important event in restoring stability.

Media around the world have been mercilessly mocking the chaos in Westminster with one comparing Britain to a banana republic.

Business leaders have warned that the situation has become untenable and is scaring off investors who are not prepared to put their money into such a feverish and unstable environment.

However, the pound rose slightly ahead of Ms Truss’s announcement amid growing calm in the markets whose response to the mini-budget prompted the crisis in Downing Street.

Tony Danker, CBI Director-General, said: “The politics of recent weeks have undermined the confidence of people, businesses, markets and global investors in Britain. That must now come to an end if we are to avoid yet more harm to households and firms. 

“Stability is key. The next Prime Minister will need to act to restore confidence from day one.  

“They will need to deliver a credible fiscal plan for the medium term as soon as possible, and a plan for the long-term growth of our economy.” 

Ms Truss, who is just 47, will become the seventh living ex-PM to enjoy a payoff of £115,000 annually. She will also retain a chauffeur-driven car and get round-the-clock protection for life, the costs of which are undisclosed.

She made her resignation statement in Downing Street just six weeks after standing in the same spot after her election.

She said: “I came into office at a time of great economic and international instability. Families and businesses were worried about how to pay their bills. Putin’s illegal war in Ukraine threatened the security of our whole continent.

“Our country has been held back for too long by low economic growth. I was elected by the Conservative party with a mandate to change this. We delivered on energy bills and on cutting national insurance.

“We set out a vision for a low tax, high growth economy that would take advantage of the freedoms of Brexit.

“I recognise though, given the situation, I cannot deliver the mandate on which I was elected by the Conservative Party.

“I have therefore spoken to His Majesty the King to notify him that I am resigning as leader of the Conservative Party.

“This morning I met the chairman of the 1922 Committee, Sir Graham Brady. We have agreed that there will be a leadership election to be completed within the next week.

“This will ensure that we remain on a path to deliver our fiscal plans and maintain our country’s economic stability and national security.

“I will remain as Prime Minister until a successor has been chosen. Thank you.”