Sir Keir Starmer is expected to announce plans to resign as Prime Minister as early as this morning, according to senior government figures.
Starmer is widely reported to be bowing under pressure to quit as Andy Burnham prepares to be sworn in as a Labour MP this afternoon.
The Times reports Burnham is planning to present Starmer with evidence that he has the support of over 200 Labour MPs to succeed him as PM.
Burnham, who was previously the Mayor of Greater Manchester, is said to be seeking a "coronation" to become PM by September.
If Burnham does become PM, the issue of who he selects as his Chancellor has split opinion, with ministers suggesting his appointment could spart a market revolt.
Ed Miliband has been linked with the role in a Burnham premiership, but cabinet ministers have warned he would not be a popular choice as he is not pro-business enough, The times reports.
One minister told the newspaper: “[Miliband] is insufficiently pro-business.
“Andy’s big test is market confidence and borrowing costs. If that’s where your perceptions are, you have to compensate for that.”
But allies of Miliband disagree and argue his is the only minister capable of working at the “pace and scale” required to transform the economy.
Unions have also come out against the prospect of Miliband becoming Chancellor, with Sharon Graham, the Unite general secretary, warning he would be a “noose around the neck” of job creation.