Ikea, the Swedish furniture giant whose flat-pack offerings grace homes from Bolton to Bangkok, has admitted that East German political prisoners had been used to make its goods for as long as three decades.

In the latest in a series of scandals to hit the company, Ikea was found to have been aware of the potential use of forced labour by its suppliers in the former Communist bloc country as early as 1978 and continued to source furniture from the German Democratic Republic until the fall of the Berlin Wall.

Ikea, which is the world’s largest furniture seller and recently announced plans to increase its number of stores worldwide by 50 per cent, said the findings of the report were a source of “deep regret” but insisted it had never condoned the use of political prisoners to manufacture its products.

It is likely that some of the prisoner-made components were on sale in Britain, where Ikea opened its first store in 1987.

The use of forced labour in East German state-owned companies did not end until the fall of Communism at the end of 1989.

The conclusions of the investigation by auditors Ernst & Young, which looked at 100,000 documents from the archives of Ikea and the German state, are deeply embarrassing for the company, whose corporate responsibility motto is “low price but not at any price”.

Jeanette Skjelmose, the company’s sustainability manager, said its staff had taken some steps at the time to ensure the use of forced labour was stopped by its suppliers in the former GDR but conceded they had been insufficient.

She said: “We deeply regret that this could happen. The use of political prisoners has never been acceptable to the Ikea Group.”

The privately-owned company, which made a profit of £2.1bn in 2010, said it was making a donation to UOKG, a German charity for victims of the former Communist regime, to support its research. The association praised Ikea for its admissions and said it hoped the company would consider compensating former prisoners.