In a major setback to their electoral hopes, the UK Independence Party is losing its biggest financial supporter.

Paul Sykes, the multi-millionaire Yorkshire businessman, is withdrawing his support after the party announced plans to contest all Tory-held seats at the general election, whatever the MP's views on the EU.

Speaking on Newsnight last night Sykes said: "There are better policies coming out of the Conservative Party than I have heard for many years. They are waking up to the idea that it's better to make your own laws than have them coming out of Brussels."

Nigel Farage, a UKIP MEP for South East England, said last night that Sykes had told him "that if the party presses ahead with these actions, he won't support them".

Farage said: "I've worked closely with Paul for four years, during which he's done a tremendous amount for UKIP. I'm very sad he was upset by what was said on Saturday. I hope there is some reconsideration of the position."