Ed Miliband faces intense pressure after the UK's third biggest union announced it was slashing funding to Labour - the first sign the Falkirk row could cost the party millions of pounds.
The GMB said it planned to cut its affiliation funds to Labour by 90%, from £1.2 million to £150,000.
While other unions were keeping their cards close to their chest last night, Labour is now braced for more to potentially follow suit.
One of the party's own MPs has estimated that Labour could lose £9m a year in total.
It is understood that Mr Miliband was given just a few hours notice before the GMB decision, widely seen as a slap in the face before Mr Miliband addressees trade union delegates at next week's TUC congress in Bournemouth, was publicly announced. The row follows Mr Miliband's surprise announcement earlier this year of sweeping reforms to the Labour's relationship with trade unions.
His action followed allegations the Unite union had tried to influence the party's selection of a candidate to fight the Falkirk Westminster seat - allegations Unite denies.
In the wake of the claims, Mr Miliband said he wanted union members to individually join Labour.
He has called for the UK's three million trade unionists to sign up to the party.
But in a major blow the GMB said that it estimated that only around 50,000 of its 420,000 affiliated members would sign up to be Labour members.
Labour last night insisted that its finances were in rude health and that it had pulled in £16m in donations last year.
According to the Electoral Commission, Labour's biggest donor between April and June 2013 was Unite, which paid £772,000.
The GMB paid £486,000 and Unison, £458,000. The shopworkers union, Usdaw, paid £411,000 and the CWU £143,000.
Labour MP Ian Lavery has described the affiliation reform as the "biggest political gamble" in the history of the party.
Mr Lavery, who chairs the trade union group of Labour MPs, said he believed fewer than 15% of union members would opt to join Labour under the changes. "People are not queuing up to join Labour - quite the opposite," he said.
But Shadow Treasury secretary Rachel Reeves said she was confident more union members would sign up under the new system.
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