Wigan MP Lisa Nandy has resigned from the shadow cabinet in protest at Jeremy Corbyn’s leadership.
She resigned following a meeting with Mr Corbyn this morning.
She told Mr Corbyn she believes deputy leader Tom Watson should take over as leader.
It was believed she had intended to stand against Mr Corbyn, sparking a leadership contest.
The New Statesman had earlier reported that she would mount a leadership challenge in the wake of a series of resignations by shadow cabinet members.
As the party found itself in turmoil amid the fallout of Thursday’s Brexit Leave vote, billionaire businessman Lord Alan Sugar said he believes it should turn to David Miliband.
The Apprentice star, who was a member of the Labour Party until its defeat at the 2015 general election, Tweeted: “Bring back David Miliband.”
In subsequent Tweets, he added: “1/2 Labour shadow cabinet may resign. Corbyn won’t walk. Labour stuck with him. Mistake made in 2010. David Miliband should have been leader.”
“It all went wrong in 2010. The wrong Miliband was chosen to head Labour. If David was appointed Labour would have won the 2015 election.”
Mr Miliband was MP for South Shields between 2001-2013, when he resigned to become president and chief executive of the International Rescue Organisation.