Rebel MPs should re-join the shadow cabinet if Jeremy Corbyn wins the Labour leadership election, a party donor has urged.

John Mills said Corbyn is “possibly” a better candidate than his rival, Owen Smith, and described the latter’s call for a second referendum as “a bad mistake”, but insisted he remained undecided.

He said MPs “probably should” return to the shadow cabinet after the leadership election: “I firmly would like to see the Labour party try to come back together again, as soon as it possibly can. Everyone knows the electorate don’t like warring factions.”

The level of support for Corbyn is “a phenomenon of its own”, he added: “It reflects the very strong feeling of many people who are not necessarily very left wing at all that the way society is organised is very unfair.”

A Times/YouGov poll put Corbyn ahead of Smith by 62 per cent to 38 per cent: an even bigger margin of victory than in 2015 (when he won 59.5 per cent).

Mills, who backed Leave in the EU referendum, is chairing a new group, Labour Future, which aims to find policies to reconnect with working-class and centrist voters.

If Labour did not succeed in winning back these voters, he warned, it would find itself a minor party: “It is really likely to be finished”.

Smith has refused to serve in another Corbyn shadow cabinet, but one rebel MP, Sarah Champion, has returned.

In the event of a Corbyn victory, MPs who have publicly declared their disatisfaction with everything from the Labour leader's management style to his ideological position will be forced to choose whether to eat their words, or resign themselves to life on the back benches.