“I believe I am well placed to deliver a Conservative victory in 2024 – and tonight I can confirm that I have cleared the very high hurdle of 102 nominations, including a proposer and a seconder, and I could put my nomination in tomorrow," Mr Johnson said.
“There is a very good chance that I would be successful in the election with Conservative Party members, and that I could indeed be back in Downing Street on Friday.
“But in the course of the last days I have sadly come to the conclusion that this would simply not be the right thing to do. You can’t govern effectively unless you have a united party in Parliament.”
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Mr Johnson said that due to the failure to reach a deal with candidates Rishi Sunak and Penny Mordaunt, “I am afraid the best thing is that I do not allow my nomination to go forward and commit my support to whoever succeeds”.
“I believe I have much to offer but I am afraid that this is simply not the right time."
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Earlier, allies of Ms Mordaunt disclosed that Mr Johnson had urged her to stand aside and back his campaign – something she refused to do.
Mr Johnson’s withdrawal leaves the election to replace Liz Truss as potentially a straight fight between Mr Sunak, the former chancellor, and Ms Mordaunt, the Leader of the House.
It could all be over a little after 2pm on Monday if Ms Mordaunt – who so far has fewer than 30 public declarations of support from MPs fails – to enough nominations to go forward.
Her supporters will be hoping that the departure of Mr Johnson will open up the contest, enabling her to make it onto the ballot paper.
If she does, MPs will hold an “indicative vote” to show who they support and there will then be an online poll of activists to decide the contest – unless one or other of the candidates stand down.
Many critics of Mr Johnson will be relieved to see him out of the race, fearing that it could plunge the party back into renewed turmoil.
While Mr Sunak – with more that 140 declarations of support according to some reports – is favourite to top the ballot of MPs, Mr Johnson’s supporters believed he would have come out top in the poll of party members.
It raised the prospect of another scenario – as with Ms Truss – where the choice of the activists does not have the backing of MPs potentially leading to more turmoil and division at Westminster.
Before the announcement, Northern Ireland Minister Steve Baker warned Mr Johnson – who still faces a Commons inquiry into whether he misled Parliament over lockdown parties in Downing Street – would be a “guaranteed disaster”.
“There’s going to be a vote before the House of Commons on this issue of privileges, whether he deliberately misled the House,” he told Sky News’s Sophy Ridge on Sunday.
“In that vote it’s guaranteed there’ll be a large number of Conservatives who will refuse, as they see it, to lay down their integrity to save him, and at that moment his premiership will collapse.”