TNS Knitwear, which supplies up to 20,000 garments to Primark a week, has been accused of paying illegal Pakistani, Afghan and Indian workers £3 an hour, just over half the minimum wage of £5, for working 12-hour days, seven days a week.
The discovery by The Observer newspaper and the BBC after a five month undercover operation comes just seven months after the BBC's 'Panorama' programme revealed that Primark's clothing suppliers in southern India were using child labour.
The high street chain also came under fire in December when War on Want, the charity that fights global poverty, staged a protest against Primark over research that its Bangladeshi workers were paid as little as 7p per hour for up to 80 hours a week.
A spokesman for Primark said: "Primark was informed this week that one of the UK factories from which it buys some knitwear has allegedly broken a number of UK employment, tax and immigration laws.
"Primark is conducting its own investigation into this. Once the investigation is complete it will decide how to proceed."
Breaches of legislation could lead to fines of up to £10,000 for each illegal worker and prosecution for tax evasion and employment law abuses.
Primark said that it has handed all relevant information passed to the company over to the relevant enforcement agencies.
It has also agreed to remove all references to the Ethical Trading Initiative, the trade body that monitors British retailers, from its website.
A spokesman for Zahid Sarwar, the owner of TNS Knitwear, said that the company had been audited by Primark within the past six months and that Sarwar had "no knowledge of any illegal immigrants working with his company".
This article was first published on brandrepublic.com