Major Tory donors are preparing to fund a grassroots campaign to leave the European Union following David Cameron’s decision to spend millions of pounds on a pro-EU leaflet, the Telegraph can disclose.

Members of the Midlands Industrial Council, a group of businessmen which have bankrolled the Conservative party for 20 years, are planning to donate between £4million and £5million to the anti-EU campaign over the next 10 weeks.

It will be seen as an attempt to redress the balance following the Government’s controversial decision to spend £9.3million of taxpayers’ money in order to send a pro-EU leaflet to every home in Britain.

David Wall, the Council's secretary, says his members are "incandescent with rage" over Mr Cameron's decision to send the leaflet.

Their decision will come as a major blow to Mr Cameron ahead of the June 23 referendum and is a sign of the anger among many traditional Tory backers at the decision to publish the leaflet, which has been described as “propaganda” by critics.