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Big Brother backlash begins as sponsor pulls out and contestants lose contracts

The financial fall-out over continued allegations of racial abuse in the Big Brother house has begun, with both Jade Goody and Danielle Lloyd losing lucrative contracts in what has become an international furore.

While speculation is rampant over whether Goody's career will suffer once she leaves the house,

the first cracks in her future earning potential have started to appear. But it isn't only the celebrities who will need to think about the financial ramifications.

As Channel 4 continued to defend the show, which has been registering a huge increase in viewers since the row over alleged bullying and racism against contestant Shilpa Shetty, Carphone Warehouse, its £3m sponsor, asked for its name and branding to be removed from the show with immediate effect.

At the same time, the retailer selling Jade Goody's Shh... perfume announced it was withdrawing the product from its shelves. Danielle Lloyd, the glamour model, lost a six-figure modelling contract.

Goody and Lloyd, and two other contestants, the former S Club 7 singer Jo O'Meara and Goody's boyfriend, Jack Tweedy, have been accused of repeated racism and bullying of Shetty, a Bollywood star.

Tessa Jowell, the Culture Secretary, weighed into the debate, branding Wednesday night's show "disgusting" and "racism being presented as entertainment". The show has attracted a record 36,000 complaints as well as public protests in India. The media regulator Ofcom is investigating. Hertfordshire Police also said that it would now conduct its own inquiry.

Inside the Big Brother house, Shetty will go head to head with Goody tonight in a public vote for eviction; the latter is favourite to go. Last night, viewers saw Goody refer to Shetty as "poppadom" ­ later explaining she wanted to use an Indian name and the only word she could think of was an Indian food. Defending her comments, Jade said: "If it's offended any Indians out there I apologise." On Wednesday night, Goody told Lloyd and O'Meara that "fake" Shetty needed "a day in the slums". She added: "Go in your community and go to all those people who look up to you and be real." Lloyd also said Shetty should just "go home", adding: "She can't even speak English properly."

Goody, who became famous and earned an estimated £4m after her initial appearance on the non-celebrity version of Big Brother in 2002, now faces a battle to regain public sympathy.

There are signs that she will have an uphill struggle. Julia Bolsom, The Perfume Shop's head of marketing said: "We have decided to withdraw Jade Goody's perfume Shh... from all our 150 UK stores with immediate effect. "

The paperback edition of Goody's biography, published by HarperCollins, is due out next month. The company said it was still going ahead, but that no promotion events had been planned, stressing that was unrelated to the controversy.

Public relations experts said it would be difficult for Goody to come out unscathed. Max Clifford, the PR guru, said: "She was born on Big Brother and maybe she will die on Big Brother." A statement issued by Goody's management said what was going on was "nothing more than a clash of personalities between two strong characters who have placed themselves in the unnatural and stressful environment of the Big Brother house."

Lloyd, stripped of her Miss England title after claims of a relationship with a judge, footballer Teddy Sheringham, lost a contract to be the face of motorcycle insurance firm Bennetts. The company said: "Bennetts is strongly opposed to any form of racism and bullying and, in light of the accusations made against Miss Lloyd, has taken the decision to terminate its arrangements with her with immediate effect." A statement issued on her behalf rejected the claims.

Charles Dunstone, the chief executive of Carphone Warehouse, said: "We are totally against all forms of racism and bullying and ... feel that as long as this continues, we are unable to associate our brand with the programme."

In the Big Brother house, after initially saying she was the victim of racism, Shetty retracted the comments. She said: "No, actually I take that back. I don't think that is true."

Andy Duncan, the Channel 4 chief executive, said: "The debate has been heated, the viewing has at times been uncomfortable but, in my view, it is unquestionably a good thing the programme has raised these issues and provoked such a debate."

What now for Jade?

Max Clifford PR Specialist

It depends on how she reacts when she comes out. If she takes the line that she is not racist and that it was edited to show the worst, she might have a chance. I wonder whether she has the ability to do it - she could open her mouth and make it worse. It's 5-1 against.

Mark Borkowski Head of Borkowski PR

We have seen many others in celebrity history return from all kinds of bad things. It's too early to say how it will go. You have to remember the people voting for eviction are Jade's demographic - but if she is not voted off the show it will be a disaster.

Gary Farrow Entertainment PR Specialist

Jade has done very well in the past, but it may be that the show that made her will become the show that kills her. It does depend on how she reacts when she comes out of the house, but I have doubts that she will be able to give an articulate response.

Claire Beale Editor of 'Campaign'

She was criticised when originally on the show and ended up being successful. It depends entirely on how she handles it when she comes out. She can turn it into a positive if she is contrite, etc. But if she does not handle it effectively, she is finished. It's a fine line.