A millionaire donor has offered to support Labour MPs who want to break away from the party following Jeremy Corbyn's election as leader.
Businessman and Hull City owner Assem Allam, who has donated £720,000 to Labour since 2010, said Mr Corbyn could not provide a "strong opposition" and warned the party could face three further election defeats.
He told The Times he would "do anything I can" to support moderate MPs as he warned "Labour under Comrade Corbyn will not make a government".
The newspaper said he would fund moderate figures prepared to launch a centrist party or defect to the Liberal Democrats.
The tycoon refused to name the amount he is willing to contribute but pointed out that he has given Labour half a million pounds this year and £220,000 before that.
"I will do anything I can if I am convinced they can form a strong opposition," he told The Times.
"You'll never have a strong opposition with this regime. I did warn Ed Miliband many times that if you go to the left side, you'll lose an election and he did.
"Corbyn is more left than Ed Miliband. We have seen in real life Tony Blair, to the right of Labour party, win an election three times ... That's a lesson that people should read.
"Labour under Comrade Corbyn will not make a government. The damage has been done, it will take a minimum two to three elections to recover."
But showbusiness agent Michael Foster, who has given Labour £420,000 since 2013, told the newspaper he had backed the leader and would continue "to give as much under Jeremy Corbyn as I did under any other leaders".
Mr Allam's comments came as Mr Corbyn appeared to rule out campaigning for the UK to leave the European Union and signalled a softer stance on a range of policy positions in an attempt to avoid further splits with his shadow cabinet.
The Labour leader, who had previously kept the door open for a campaign to leave the EU, said he could not envisage a position where he would recommend a vote to sever ties with Brussels even if David Cameron's renegotiations delivered a deal he did not like.
The new leader's comments come after shadow foreign secretary Hilary Benn said the party would not "walk away" from Europe and shadow justice secretary Lord Falconer threatened to resign if Labour adopted a policy of campaigning for Brexit.
Mr Corbyn also said that he would not attempt to dictate policy in other areas, including his personal opposition to the Trident nuclear deterrent or welfare cap, where he has clashed with members of his top team.
Instead, he said he would attempt to persuade them of his views but indicated that he would accept the outcome of the policy-making process.
But he stressed the overwhelming mandate he had received in his leadership victory and hinted at changes to give the party's grassroots - whose support helped him win - a greater say over Labour's policy platform.
Mr Corbyn maintained his position that he would not give Mr Cameron a "blank cheque" in his plan to renegotiate the UK's ties with Brussels ahead of the promised in/out referendum and said he wanted to see a "social Europe" rather than a "free market Europe".
But he told the BBC if Mr Cameron's new deal with the EU involved unacceptable measures, Labour would "say we have to stay in Europe to change those policies".
If the Prime Minister's deal was unacceptable, he said: "What I would do is strongly oppose what Cameron has done and say we have to stay in Europe to change those policies and that would be a manifesto commitment up to 2020. But we are working this position out at the moment."
Mr Corbyn's opposition to the welfare cap has also caused difficulties, with shadow work and pensions secretary Owen Smith warning it would be "foolhardy" for the party to "set our face unthinkingly" against a policy that had public support.
The Labour leader told Channel 4 News: "The policy is that we work within the total budget of £120 billion. My proposal, which the party will have to discuss - and they will - is that we should not impose the current benefit cap."
But he accepted he would have to "live with it" if his opposition to the cap was rejected by the party because "I am a democrat".
On the future of the nuclear deterrent, Mr Corbyn insisted he would not let the policy differences tear Labour apart.
"I hope the party will come to a position of wanting us to become a nation that does not renew nuclear weapons, but we are not going to divide and ruin ourselves as a party over this."
If he failed to get his way, Mr Corbyn insisted he would not walk away from the leadership which he won with a landslide from Labour members and supporters.
He said: "I'm not resigning. I have been elected on a mandate from more than a quarter of a million people."
Setting out the changes he wanted to see in the way that Labour's policies are set, he said: "What we are going to have to do is change our policy-making process to empower local constituency parties and affiliated unions and take it through to conference in the future."