Shadow Treasurer Michael Daley has withdrawn from the NSW Labor leadership ballot race.

His decision to pull out paves the way for upper house Labor leader Luke Foley to clinch the party’s leadership in a ballot to be held on Monday.

Mr Daley said while it would have been a close race, it had become clear to him that Mr Foley had the numbers.

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“I’d like to congratulate Luke on his impending victory,” Mr Daley told reporters in Sydney.

Mr Daley was the first Labor MP to say he would run for leadership after John Robertson stood down following revelations he had signed a letter in 2011 in his capacity as Blacktown member on behalf of the Sydney siege gunman Man Haron Monis.

He said Premier Mike Baird should be very worried about the choice the Labor Party will make on Monday.

“Luke is a very, very formidable character,” Mr Daley said.

“He’s got a mind like a steel trap and he will be more than a match for Mike Baird.”

He said he had discussed his decision with Mr Foley over lunch earlier in the day and had not asked to be handed any portfolios under his leadership.

After his expected anointment as leader next week, Mr Foley will likely turn his attention to becoming Labor’s candidate for the western Sydney seat of Auburn, currently held by Barbara Perry.

Mr Daley’s decision to withdraw from the ballot comes days after upper house MP Steve Whan also pulled out of the running.