Tory leadership race may 'bankrupt party' if it goes on too long

However, senior figures at the party's headquarters have voiced disquiet at the idea of "going long" with the contest, citing the impact this would have on the party’s ailing finances.

The Telegraph reports that party bosses acknowledge that until a new leader is appointed, new donors are unlikely to come forward.

One insider told The Telegraph: "It is a bit of a fool’s errand giving a million quid when you don’t know who is going to be in charge. Why would you give any money when you don’t know the direction the party is going in? The party could go in 10 different directions. There is a lot of uncertainty."

It comes after a five hour party board meeting to discuss the party's future ended without an agreement on the financial process.

A source said: "The argument around the lack of finances has been articulated internally. From a purely pragmatic point of view, it is definitely a reason to go short. So either having someone in place by conference or having the final hustings at conference."

The Conservatives are set to hold their annual conference in Birmingham at the end of September.

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Another argument going on inside the party is that a new leader must be in place by the time of Rachel Reeves’ first Budget.

One source said: "If you don’t have someone in place by the Budget, they just get a clean run. If they successfully manage to argue the economy is in tatters, they will use it to justify tax rises and all manner of things.

"It is very important to not let that narrative set in, and that is another argument to go short with the contest....We did it quite successfully in 2010 when we used the ‘there’s no money left’ note to justify austerity."

The source said the party is not going to go bankrupt imminently but added that it is "definitely going in that direction. The reality of running CCHQ is that it costs a lot just to leave the lights on."

A Conservative Party spokesman told The Telegraph: "The party board met on Thursday and had a good discussion about the options for the leadership process presented by the 1922 Executive Committee. The 1922 Executive Committee will meet again and announce the leadership process next week.

"Due to the generosity of supporters and members, CCHQ’s finances are in a suitable state for a post-election period. The party board’s responsibility is to review finances.

"A new leader being in place in the near future, will ensure that we provide an effective opposition and assist in helping our hardworking councillors, local candidates and activists as soon as possible ahead of the local elections."