Northern Foods, chaired by the Labour peer, Lord Haskins, is removing GM ingredients from its brands following consumer fears over their safety.
The company, one of Britain's biggest food manufacturers, supplies all the main supermarkets as well as producing its own brands such as Goodfellas Pizzas and Ski yoghurts.
Northern Foods has not yet publicly announced the move, but The Independent has learned that it has decided to go ahead with a ban in the wake of similar decisions by Tesco, Safeway and Sainsbury's.
Lord Haskins, chairman of the Government's Better Regulation Task Force, is a big donor to Labour Party funds and one of the Prime Minister's most trusted business advisers.
His company's decision will embarrass the Government as Mr Blair and his ministers have repeatedly stressed that GM products are safe and have ruled out a moratorium on commercial release of GM crops.
Both Tesco and Unilever announced last month that they were working with Greenpeace, the green lobby group, to phase out GM ingredients from their own-label brands with a view to becoming "GM-free".
Dr Geoff Andrews, technical services executive at Northern Foods, confirmed yesterday that the firm had decided to phase out GM ingredients in all its products.
"We are doing this right across our business. We have been doing it in support of the supermarkets' own-label brands and now we're are also doing it across the whole of our manufacturing activity. It is the right thing to do," he said.
Mr Andrews said that Northern Foods had decided not to make public its decision largely because it was not the "culture" of the company to boast of its activities.
Sarah Burton, campaigns director for Greenpeace, saidNorthern Foods' decision meant that not a single large manufacturer in the UK now planned to retain ingredients such as modified maize or soya.
"This is the latest in a long line of decisions by the big manufacturers and supermarkets who have been forced to respond to public opinion," she said.
"It means that the Government is isolated and in serious danger of looking silly if it continues to back GM food. I would hope that Tony Blair now listens to this message, coming as it does from one of his closest business advisers."
Only last week, Mr Blair defended GM foods in the Commons and Jack Cunningham, who chairs the cabinet committee on biotechnology, attacked "media hysteria" on the issue.Reuse content