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Budget fashion retailer Primark has dropped three Indian suppliers after admitting they were using child labour.

A BBC Panorama investigation found several firms making clothes for the chain had occasionally sub-contracted work out to companies which used children for embroidery work.

George Weston, the chief executive of Associated British Foods, the parent company of Primark, said: "We are appalled, we feel let down and we are taking all the action we can to prevent this happening again."

The company insists it was not aware child labour was being used on any of its products and has removed the items from its stores.

The suppliers involved are believed to produce 200,000 garments a year for Primark and also supply other UK retailers.

Mr Weston said the suppliers had been audited three times in the past 18 months to ensure their work practices were up to scratch but had been deceiving Primark.

The company has moved quickly to repair the damage from the discoveries. It told reporters it will appoint a reputable non-governmental organisation in the southern-Indian region to act as its "eyes and ears on the ground" and will also set up a charity to improve the lives of young people in the area.

Primark says it can afford to sell its clothes cheaply because of its low overheads, low mark up and lack of expensive advertising.

Owner Associated British Foods is a member of the Ethical Trade Initiative (ETI), a group of organisations that aim to improve conditions for workers that make products for UK consumption.

Spokesperson for ETI, Julia Hawkins, said: "It's important that retailers have a continuous improvement approach to suppliers and treat ceasing to trade as an option of last resort.

"We continue to support Primark."

But the company has faced several allegations of allowing poor working conditions. Recently Channel 4 cancelled a programme called The Devil Wears Primark, without announcing the reason, while the BBC has earlier shown Blood, Sweat and T-Shirts highlighting ethical trade issues.

The company has soared in popularity in recent years and now accounts for ten per cent of the market, making it the second most popular clothing retailer in the UK.