Sir Philip Green has abandoned his legal action against the Daily Telegraph, which was meant to stop the paper reporting on allegations of sexual harassment and racist behaviour against him.

Last year the Telegraph reported that an unnamed businessman had used non-disclosure agreements to prevent five former employees talking about financial settlements reached over alleged sexual misconduct and racism on Mr Green's part.

The Court of Appeal had granted him an injunction which prevented the paper from naming him.

But days later, Labour peer Lord Hain used parliamentary privilege to name Sir Philip, the chairman of retail company Arcadia Group, as the businessman in question.

In a statement, Arcadia said: "After careful reflection, Arcadia and Sir Philip have reluctantly concluded that it is pointless to continue with the litigation which has already been undermined by the deliberate and irresponsible actions of Lord Peter Hain.”

The Topshop tycoon has described the reports of the allegations against him as “vicious personal attacks” and “untrue allegations”.

Despite dropping his action against the Telegraph, Sir Philip warned that there could be “further legal action” against anyone who had signed a non-disclosure agreement but decided to speak out.

Lord Hain responded: "Parliamentary privilege has always been resented by the rich and powerful when it is used as I did in this case to defend human rights and justice when under attack.

“It is of fundamental constitutional importance as the only absolute right to free speech cemented in our law.”