"I recognise, given the situation, I cannot deliver the mandate on which I was elected. I have spoken to King Charles to notify him I’m resigning as leader of the Conservative Party," Truss said.

The development comes?after her new Chancellor of the Exchequer, Jeremy Hunt, rolled back virtually all of her economic agenda.?

The 47-year-old outgoing prime minister will stay in charge until her successor is elected by the governing Tory party, with a speeded-up leadership election to be completed by next week.?

Her former leadership rival, Rishi Sunak, is seen as a frontrunner in that race but a consensus within a divided Tory party remains elusive, with the Opposition Labour Party renewing calls for an immediate general election.

The embattled leader said she had spoken to King Charles III to notify him of her resignation and also met the 1922 Committee chair Sir Graham Brady, in charge of Tory leadership elections.

"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 countries economic stability and national security. I will remain as Prime Minister until a successor has been chosen,” added Truss.

A downcast Truss, who stepped out of 10 Downing Street with her husband, said she had taken over at a time of great instability but ultimately admitted she had failed in her mission to deliver her economic agenda.

Truss was Britain's third female Prime Minister after Margaret Thatcher and Theresa May.

Sunak, who lost out to Truss' now failed tax-cutting agenda in the leadership race last month, is seen as a key contender to step up to the post. But the picture remains extremely uncertain due to deep infighting within Tory ranks.

Loyalists of former prime minister Boris Johnson believe the party should bring him back, given his solid electoral mandate from the 2019 general election. However, Truss’ current troubles are themselves reminiscent of how Johnson was dragged out of office and forced to resign in early July amid an open revolt by a growing number of his MPs and ministers.

The latest turmoil comes a day after Suella Braverman’s explosive exit from the Cabinet after admitting a breach of the ministerial code by discussing government policy in private emails and a scathing parting attack on her boss.

"Not only have we broken key pledges that were promised to our voters, but I have had serious concerns about this government’s commitment to honouring manifesto commitments, such as reducing overall migration numbers and stopping illegal migration, particularly the dangerous small boat crossings,” the Indian-origin former Home Secretary wrote in her resignation letter.

Her exit came over what experts believe was a relatively low-level ministerial breach but reflects more serious differences between Braverman and Truss over the country’s immigration policy.?

Following Truss's resignation, the cost of government borrowing rose and the pound fell further.?The pound rose 0.36 per cent today. A "mini-budget" last month had proposed vast, unfunded tax cuts, triggering an intervention from the Bank of England as borrowing costs surged, the pound tumbled and mortgage rates jumped.

Many Conservatives have been saying that Truss must resign – but she remained defiant, saying she was “a fighter and not a quitter.”

(with PTI inputs)