THERESA May’s government could collapse next year because of Brexit, a group of leading economists have claimed.

Researchers from Morgan Stanley said they predicted May would make “enough concessions” in Brexit talks to keep her government going in 2017, but splits in the Cabinet and her party would lead to a vote of no confidence.

In a research note, they said: “We expect the EU to offer a choice between a close relationship in which the UK can participate in the single market and customs union but will be bound by the EU rules of the game, and an arm’s-length relationship ... in which the UK achieves full sovereignty over borders, courts and laws, but does not participate in the single market and the customs union.

“We think this choice splits the Cabinet and the Conservative party and will lead to a loss of a vote of no confidence in parliament, triggering early elections.”

The researchers also warn that the instability will see growth grind to a halt.

The warning from the economists comes amid rumous Jacob Rees-Mogg, the right-wing, Brexiteer Tory MP, could be heading into government as a weakened May reshuffles her cabinet.

Rees-Mogg, who has, surprisingly, emerged as a possible contender to replace May when she eventually stands down, is reportedly being considered for a ministerial post so he can “earn his spurs,” according to reports.

A Downing Street source told a newspaper May was “bringing him in” to a role that would make him “do a bit of grind” in office.

“People have to earn their spurs,” the source added.

“It’s great to be the fun uncle who turns up to see the children, stuffs their mouths with McDonald’s, takes them on the rollercoaster, winds them up before bedtime and then walks away.

“The grown-ups have to deal with the consequences.”

The Old Etonian, who was the Tory candidate in Central Fife in 1997, where he canvassed with his nanny, is one of a number of MPs being considered by the Prime Minister for promotion.

Desperate to cling onto power, and with a working majority of only 13, May is looking to try and dampen any rebellion before it happens.

According to the newspaper, party chairman Sir Patrick McLoughlin may step down and be replaced by Boris Johnson, the much-derided Foreign Secretary with whom May is losing patience.

Last week Johnson was described as a “clown” and a “joke” by government colleagues.

Unfortunately for May there are plenty in the party who seem to have lost patience with her.

She dismissed criticism of her leadership last week, insisting she “isn’t a quitter” and that she plans to go on and on.

Former ministers Nicky Morgan and Grant Shapps have said it would be difficult for her to continue given the inept election campaign that saw her squander her working majority.

At a press conference alongside Japanese prime minister Shinzo Abe, May said: “I said I wasn’t a quitter and there is a long-term job to do.

“There is an important job to be done in the United Kingdom, we stand at a really critical time in the UK.”

With MPs heading back to Parliament today, Brexit and the budget look set to dominate.

The Great Repeal Bill, formally the EU (Withdrawal) Bill, will de debated on Thursday with votes expected the following Monday.

Downing Street has also described as “speculation” reports that May might be preparing to end the one per cent cap on pay rises in the public sector. About a fifth of all public-sector workers in Scotland have their wages set by the UK Government.

Over the weekend, there were reports Nicola Sturgeon will move to end the pay cap in Scotland when she announces her programme for government in Holyrood today.

A tabloid newspaper reported that May and Chancellor Philip Hammond would follow suit and make their announcement in the November Budget.

Meanwhile, new Scottish Tory MP Paul Masterton has insisted he and his 12 colleagues would not be scared of using their pointy elbows to get their way from the Tory leadership.

In a newspaper interview, he said: “There will be times when it is necessary for us to pull together, but we’re not going to be shy about recognising the fact that there are 13 of us here and sometimes elbows need to be sharpened.”

The East Renfrewshire MP said he and his colleagues could, for example, tell the Chancellor what to put in his Budget.

“Big policy areas where we have to say ‘no, sorry, this doesn’t work for Scotland – you need to listen to us’.

He said it would “important for people back in Scotland to see that”.

As SNP spokesman was sceptical.