Human rights campaigners were celebrating one of their biggest corporate victories last night after British American Tobacco agreed to quit Burma in a significant climbdown.

The world's second largest cigarette group said it was leaving the military-run nation, which is also known as Myanmar , with regret and insisted it was only doing so after an "exceptional" request from the British government.

BAT, whose deputy chairman is former chancellor of the exchequer Kenneth Clarke, has tied up an agreement to sell its stake in Rothmans of Pall Mall Myanmar to a Singapore investment house.

The deal aims to safeguard jobs at its factory outside Rangoon and the continued marketing of BAT brands in Burma.

"We believe the solution is a balanced outcome to a difficult dilemma ... We are leaving our role in Rothmans of Pall Mall Myanmar with regret, as our managers have established it as one of Burma's best employers," said Michael Prideaux, director of corporate and regulatory affairs at BAT.

Company chairman Martin Broughton was asked this summer by foreign office minister Mike O'Brien to withdraw from the country.

The request followed a crackdown by the military in Burma on May 30 when pro-democracy leader Aung San Suu Kyi was arrested. Dozens of her supporters were allegedly killed in an ambush by pro-government supporters.

BAT's retreat follows the exit of Premier Oil and travel groups such as Abercrombie & Kent.

The Burma Campaign UK and Federation of Trade Unions in Burma have targeted BAT over the last 12 months in a sustained verbal assault on the group.

"This is a huge victory," said John Jackson, director of the Burma Campaign UK. "They had to be dragged out kicking and screaming but at least they are out. If a company like BAT can be forced out of Burma any company can be."

Mr O'Brien said he was "delighted" by the news. "I appreciate that this was a difficult process, but I am in no doubt that the decision was the right one," he said.

Activists were given ammunition when Mr Clarke admitted in a letter to a constituent that he had reservations about working in the south-east Asian nation.

"The problem in Burma arises when companies start collaborating with an extremely unpleasant regime, which is totally contrary to our notions of civil liberties and democracy," he wrote.

BAT had argued that one of the main obstacles to pulling out was concern that it could mean the end of 500 jobs at the cigarette factory.

This argument was undermined in June when it axed the same number of staff at its Darlington plant as part of 1,300 job cuts in Britain and Canada.

BAT entered Burma in 1999 when it acquired Rothmans International, which owned the stake in the Burma factory.

The London-based tobacco group declined to discuss the financial details of the sale of the 60% stake in the factory, which is being bought by Singapore's Distinction Investment Holdings. It insisted the sell-off had nothing to do with the campaign and was solely a response to the British government's request.

The remaining 40% of the Rothmans business in Burma is held by the junta there.