THERESA May’s Conservative government will collapse in 2018 and trigger a fresh election, a leading think tank has predicted.

According to Morgan Stanley, by next year May will be unable to keep walking the ‘tightrope’ of just about satisfying both the moderate and more radical wings of the Conservative Party – as well as the general public.

“We think the government survives in 2017, but falls in 2018,” the note, compiled by a team of economists and strategists led by Jacob Nell and Melanie Baker, read.

May’s tiny parliamentary majority means just a handful of hardline Brexiteers rebelling against her could cause a disastrous government collapse.

Morgan Stanley said: “This year, we think that the government makes enough concessions to allow the talks to progress, and the government holds together since the outcome of the talks is still open and Labour are ahead in the polls.

“Next year, however, we think that the government is likely to fall. 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 the UK, 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 team added: “In turn, we expect the associated political instability to drive weaker consumption and investment,and push growth to a standstill, leading the BoE to consider – but in the end decide against – easing policy to support growth.”