Nigel Farage is planning to announce a new political party to oppose Theresa May’s ‘Brexit sell-out’ if an anti-Islam campaigner wins the Ukip leadership this week, The Mail on Sunday understands.

Mr Farage, who stepped down as Ukip leader following last year’s EU referendum, has told friends that he will form a breakaway party if favourite Anne Marie Waters wins the party leadership election.

Ms Waters infuriated Mr Farage by claiming that ‘millions’ of Britons agreed with her view that Islam was ‘evil’.

Anne Marie Waters, pictured, is the front-runner to become Ukip's latest party leader

Nigel Farage, pictured is concerned Ms Waters will tarnish Ukip's name with her extreme views and will instead create his own anti-Brexit party bringing many of his MEPs with him

Now, following the Prime Minister’s Florence speech effectively delaying our EU withdrawal until 2021 – which Mr Farage described as ‘sticking two fingers up to the millions of people who voted for Brexit’ – he has told friends that he is ready to launch his new movement.

Mr Farage believes that with Tory Brexiteers increasingly prepared to accept Mrs May’s ‘soft’ Brexit proposals, so as not to destabilise her Government, he has an opportunity to appeal to disenchanted Tory Eurosceptic voters. The former Ukip leader believes the party would be ‘finished’ if it became an anti-Islamic party.

It is understood that Mr Farage is currently planning to make an announcement about the new party – which does not yet have a name – in Strasbourg early next month if Ms Waters becomes leader.

Under the plan, Mr Farage and the 19 other Ukip MEPs would transfer their allegiance to the new Farage movement, until they lose their jobs when the UK leaves the EU in March 2019.

Mr Farage hopes to use the next 18 months to protest against what he claims to be an attempt by Mrs May’s Government to ignore the result of the referendum and try to keep the UK in the EU by ‘the back door’.

The new party would be set up with the help of Arron Banks, who was Ukip’s main bankroller when Mr Farage was leader.

Last night, Mr Banks said: ‘If Ms Waters becomes Ukip leader, all we ask is that she gives the party a decent burial. The country needs an effective political movement to stop May from selling out on the Brexit which British people voted for last year.’

Mr Farage would also use the new party as an opportunity to shed his old enemies in Ukip, such as the former Tory Mp Neil Hamilton.

Ms Waters, the director of Sharia Watch, has made a series of controversial remarks about Islam, saying: ‘We ought to be able in this country to say whatever we like about a religion and the problem we have got is that we pussyfoot around, we spend so much time agonising over not saying the wrong thing, and this is what’s putting the public off.

‘But this is how millions of people in this country feel and they are waiting for someone to articulate it for them.’

Mr Farage’s successor, Paul Nuttall, lasted just six months as leader following a disastrous General Election in which it won 1.8 per cent of the UK vote and did not see a single candidate elected as an MP.

Mr Farage’s spokesman did not return calls.