A Conservative MP used the phrase “n***** in the woodpile” when describing the possibility of the UK leaving the EU without a trade deal.

Anne Marie Morris, who has been an MP for Newton Abbot since 2010 and is pro-Brexit, made the comment in a discussion on financial services deals the UK could make with the EU after 2019.

In an audio recording obtained by The Huffington Post, other leading Tory Brexiteers, MPs Bill Cash and John Redwood, do not react to the use of the term.

The phrase, which has a similar meaning to “trojan horse”, has deeply racist overtones, dating back to the slavery era, and suggests a runaway slave could be hiding in the woodpile.

In 2008, then Conservative leader David Cameron was urged to sack a Tory peer after he used the term in a Lords debate.

Ms Morris said that just 7 per cent of financial services currently used in the UK would be impacted by Brexit, and then said: “Now I’m sure there will be many people who’ll challenge that, but my response and my request is look at the detail, it isn’t all doom and gloom.

“Now we get to the real n***** in the woodpile which is, in two years what if there is no deal?”

Ms Morris has apologised for the comment. She said: “The comment was totally unintentional. I apologise unreservedly for any offence caused.”

A Conservative spokesman said: "We are aware of these reports, this kind of language is completely unacceptable, and we are urgently investigating."

Asked about the incident in the House of Commons, Theresa May said: "I think it is beholden on us all that we use appropriate language at all times."

David Isaac, chairman of the Equality and Human Rights Commission said: "This language belongs to another era and is highly regrettable. At a time when we need to heal divisions in our country, using a phrase like this will offend the vast majority of people across the UK. We should not tolerate language of this sort. The Prime Minister should take immediate action."

Ms Morris used the comment at the launch of a report into Britain’s financial services industry after Brexit, held at the exclusive East India Club in St James Square. It was organised by the Politeia group, which calls itself as “a forum for social and economic thinking”.

Reacting, Green Party co-leader Caroline Lucas urged the Tories to remove the whip from Ms Morris, tweeting: “Appalling. Should have the whip removed immediately. No place in our politics for racism, full stop.”

Liberal Democrat leader Tim Farron said: “This disgusting comment belongs in the era of the Jim Crow laws and has no place in our parliament.

“The Conservative Party should withdraw the whip from Anne Marie Morris and they should do it today.

“Every hour they leave her in place, is a stain on them and the so called ‘compassionate conservatism’ they supposedly espouse.

“I am utterly shocked that this person represents the good people of Newton Abbott.

“Even if she misspoke this is the nastiest thing I’ve heard an MP utter since Lord Dixon Smith uttered the same awful phrase a few years ago.”

In the run-up to the general election, Ms Morris had to distance herself from comments made by her husband and electoral agent, Roger Kendrick, at a husting event, during which he claimed that “the crisis in education was due entirely to non-British born immigrants and their high birth rates."