The Labour Party fears it could face bankruptcy if the equalities watchdog finds it is institutionally antisemitic, it has been reported.

The Independent reports that members of its ruling body, the National Executive Committee (NEC), have privately voiced fears that the party could face legal action from Jewish members if the Equalities and Human Rights Commission concludes the party is racist.

Labour is the second party, after the far-right BNP, to face a probe from the EHRC over allegations of racism.

The paper reported the prospect of legal battles if the EHRC found the party is racist - and who would be financially responsible for them - were raised at a recent NEC meeting but the conversation was shut down by allies of Jeremy Corbyn.

One NEC member told the Independent it could be NEC members who bear the financial burden, saying: "If it’s really bad then it opens up all sorts of possibilities and it has been raised that the whole thing could basically bankrupt the party.

“People are really worried."

The EHRC announced its inquiry in May and is expected to produce a report with recommendations next year.

Rising staff costs helped push Labour into the red last year, making a loss of £655,000 compared with a surplus of £1.45 million the year before.

Speaking to the JC last month, deputy leader Tom Watson said he had been kept in the dark about the party's response to the EHRC but revealed some of his "NEC colleagues" were due to give evidence themselves.