Theresa May
The prime minister faces a loss of support from the City and industry heads if she opts for a hard Brexit Justin Tallis/AFP

A major Conservative Party donor has threatened to withdraw financial support if Theresa May pulls Britain out of the EU's single market.

Sir Andrew Cook, who has given more than £1.2 million to the Tories, told The Times the country could "sleepwalk to disaster" if membership of the single market was sacrificed in a bid to curb immigration.

He said the move would put jobs and exports at risk, adding that it would be "impossible" for him to continue to support the Prime Minister if she chose to pull out of the EU completely.

He explained that his own steel company William Cook, which is the UK's largest manufacturer of steel casings, is reliant on exports to mainland Europe and the supply of skilled labour from the continent.

"I'm trying to explain how critical the single market is to the real economy," he told BBC Radio 4's Today programme. "Two miles away is one of my factories, with 200 people employed making engineering parts that go to France, Germany and Italy for pumps and so forth.

"Thirty five miles up the road in Leeds I've another factory with 200 people making other stuff for the train manufacturers of Germany, Austria and so forth. The single market is essential to keep these people in employment."

"There are barriers to entry without the single market, there are tariffs. There is a desire by my competitors in mainland Europe to exclude me from the market. Were it not for the single market I would not be trading with these people.

"There is no domestic manufacturing industry of any major size in this country with which to trade. It is vital to these jobs and people that are trying to reduce the chronic and dangerous balance of payments deficit that this country suffers from."

Sir Andrew said that the Polish machinists at his plant in Leeds, are skilled labourers who are eager to work. "We are talking about EU citizens, with skills, coming here to fill jobs that British people are either unable to do or don't want to do," he told The Times.

"The economic arguments of staying in the single market are overwhelming and I have yet to see any plausible alternative arguments being put forward to leaving the single market," he said. "It seems to me the political tail is wagging the economic dog. There appears to be a willingness to consider the sacrifice of withdrawal from the single market, which I believe will be a catastrophe."

Sir Andrew, who was treasurer of the Conservative In campaign which sought to keep the UK in the European Union at the 2016 referendum concluded that he may be compelled to withdraw funding for the Conservative party.

"I would find it impossible under those circumstances [to keep donating to the Conservative Party should it back leaving the single market]. It is very difficult to make a political donation to a party when, although I support it ideologically, I do not believe that my interests and my ideology are ad idem with the principal Brexiteers."

The steel magnate made the comments as a second key Conservative donor said he was suffering 'donor fatigue' ahead of EU negotiations The Evening Standard reports.

While the prime minister faces a loss of support from the City and industry heads, she has insisted she wants firms to have the "maximum freedom to trade with and operate in the single market".

EU leaders have repeatedly stressed that free movement of its citizens is a condition of single market membership that will not be negotiated away.

The Institute for Fiscal Studies (IFS) has warned that leaving the single market could leave Britain £70bn worse off due to slower growth ($91bn, €81bn).

Remaining in the single market could deliver a 4% boost in national income to the British economy, equivalent to two years worth of growth.