Mr Powell reportedly turned down an offer to replace Mr McSweeney, and instead plans to return to the lucrative world of consulting. Mr Powell, who authored the Chagos deal which would see the UK paying billions to a foreign country as well as handing away its own territory, set the consultancy firm up in 2011 after departing a similar role with former Prime Minister Sir Tony Blair. The Chagos deal, branded a 'surrender deal' by critics, would see the UK paying £35 billion over 99 years so it can rent its own military base back from a foreign country.

Mr Powell has been a key part of Sir Keir's charm offensive with the Chinese, and is seen as an instrumental figure in brokering a closer relationship with Beijing. His role in ongoing talks with China came under intense scrutiny last year when a trial of two men collapsed, with both men accused of spying for the Communist nation.

Staffing changes in Number 10 have made headlines since the Mandelson scandal saw a shake up of the Prime Minister's team. News of Mr Powell's potential departure comes just days after Number 10 forced out Cabinet Secretary Sir Chris, and handed him a six-figure payout.

Critics slammed the move, with the Tories accusing the Prime Minister of a "cover-up". They claimed Sir Keir sacked the Cabinet Secretary because he was concerned Sir Chris would release more information regarding the government's knowledge of the Mandelson case. Alex Burghart, the shadow chancellor of the Duchy of Lancaster, said that Sir Chris had been "forced out" for wanting to be "honest with MPs and the public".

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Mr Burghart said: "Once again it looks like Keir Starmer is covering up incriminating material in a desperate attempt to save his own skin. As Kemi Badenoch has warned, Chris Wormald’s exit raises serious doubts about the Government’s honesty. Starmer has serious questions to answer.

"The Prime Minister cannot be allowed to conceal information about this appalling scandal. He must pass all documentation to the Intelligence and Security Committee without delay and ensure full transparency in the process to replace the Cabinet Secretary."

It was reported that a Downing Street source denied Mr Powell intended to step down.