Pro-Europeans fear deal with UKIP after defection of Sykes

Tory hopes of an electoral deal with the UK Independence Party were revived last night after UKIP's main financial backer, Paul Sykes, withdrew support and urged Eurosceptics to vote Conservative at the next election.

Tory hopes of an electoral deal with the UK Independence Party were revived last night after UKIP's main financial backer, Paul Sykes, withdrew support and urged Eurosceptics to vote Conservative at the next election.

However, pro-European Tory MPs warned last night that they would not accept more Eurosceptic policies as the price for a deal with Mr Sykes.

Ian Taylor, a pro-European former minister, said: "Tory Party policy is to stay in the European Union. Michael Howard has made that clear. Policies are now coming forward which are not deliverable.

"As they are undeliverable, the first Europe minister under a Howard government would have to be sacked because he has said they would only stay in place if they performed. The sooner we come to talk more realistically about how to handle Europe the better it will be."

Yesterday, Mr Sykes had a pre-arranged lunch at a London restaurant with Robert Kilroy-Silk, the former television chat show host and MEP for the East Midlands, a personal friend.

Afterwards Mr Sykes said: "I am going to urge people to vote for the Conservatives because there is no other party likely to form a government that has come out saying we are going to repatriate our laws and we are against the euro forever."

He said he had never been a member of UKIP, despite his huge donations to the party.

Mr Sykes, thought to be Yorkshire's fourth richest man, has a personal fortune reputed to be £495m. He lives in Harrogate, but grew up on a council estate in Barnsley. He left school without qualifications and made his first fortune breaking up old buses and exporting them to Hong Kong but struck it rich as a property developer when he joined a consortium that built Meadowhall, an out-of-town shopping centre, on the site of a former steel works, by the M1 on the outskirts of Sheffield. He sold an internet company, Planet Online, for £85m in 1998.

Mr Sykes stood as a Conservative candidate in Barnsley Central, but fell out with the Tory Party when Margaret Thatcher, pressured by John Major and Kenneth Clarke, led Britain into the exchange rate mechanism. He left and rejoined the Tory party twice before backing the late James Goldsmith's anti-euro Referendum Party, which fielded candidates against Tory MPs.

He poured £1.4m into UKIP to fight the 2001 and European elections and was apparently poised to bankroll the party for half of its budget for the next election. He withdrew the funding after private talks with John Redwood, the Eurosceptic former cabinet minister, who was recently brought back onto the front bench by the Tory leader, Michael Howard.

Mr Redwood denied he had engaged in negotiations with Mr Sykes, but he confirmed he had helped to secure his support after reassurances about the Conservative policy on Europe.

The Tory education spokesman, Tim Collins, told the conference UKIP would not win a seat at the general election. Urging UKIP voters to "come home" to the Tories, he said: "Don't just hope for a Euroscep- tic government, vote for one."

The intervention by Mr Sykes gave the Conservatives a desperately needed boost to their conference week. Some MPs were relieved at the prospect that they may not face a challenge from UKIP, if a deal can be reached. However, UKIP said Mr Sykes's funding would be replaced by its other backers.