The chancellor took a flight back to London overnight amid the crisis over his economic plans (Picture: HM Treasury)

Kwasi Kwarteng has cut short a trip to the US to fly back to London where is widely expected to announce the mother of all U-turns.

The chancellor is under intense pressure to scrap his economic plans after they caused turmoil in the markets and threatened to split the party in two.

With the Tories miles behind Labour in the polls and talk of a leadership challenge mounting, there is speculation Liz Truss could sack her close ally in a bid to restore the government’s economic reputation.

Mr Kwarteng had been due to hold further meetings in Washington DC where he was attending a meeting of global finance ministers.

He confirmed to reporters overnight that he plans to fly back to London a day early but sources close to him denied it was a sign of panic.

Speaking about his dash back to London, an unnamed source told the BBC that the chancellor ‘really wants to engage not only with government colleagues, but also MPs’ over the plans.

But after a day of rumours that the prime minister was in discussions about dropping key tax pledges amid fears her government collapse, the move will be widely seen as an attempt to avert a crisis.

Mr Kwarteng has already been forced to move the publication of his full economic plans forward to October 31 in a bid to calm nerves among investors and MPs but deep scepticism continues to hang over his unfunded tax cuts.

The PM and chancellor are close political allies and share an economic vision but many investors, MPs and voters have lost confidence in the pair (Picture: Reuters)

A pledge to scrap a planned increase in corporation tax from 19% to 25% is widely considered likely to be dropped altogether.

Talks were reportedly under way between the Treasury and Downing Street yesterday about ditching the £43 billion tax proposals in full or in part.

It’s unclear if Mr Kwarteng joined those calls remotely from the US, where he is attending a meeting hosted by the International Monetary Fund.

After weeks of insisting there would be no U-turn, he told The Telegraph ‘let’s see’ when asked if a dramatic change in policy is coming yesterday.

Just 38 days into the new government, there is the very really possibility of Liz Truss’ administration falling apart without a major uptick in fortunes or change in direction.

Mr Kwarteng said he was ‘100%’ sure the pair would be in office in a months time but there is huge discontent among Tory MPs and talk of a change in leadership.

The chancellor has cancelled meetings and flown back early from an IMF meeting in Washington DC (Picture: HM Treasury)

One idea reportedly being discussed by MPs is a unity ticket involving Rishi Sunak and Penny Mordaunt, two former leadership candidates who jointly received more backing from MPs than Liz Truss.

Ms Truss has overseen a dramatic collapse in the party’s fortunes in the polls which has seen it trail Labour by historic margins.

A survey of voters in the ‘blue wall’, once considered safe seats, revealed the Tories would be wiped out on current polling trends.

This is a breaking news story, more to follow soon… Check back shortly for further updates.

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The chancellor is on his way back to the UK with his budget – and even the government – on the brink of falling apart.