The phone hacking scandal at the Rupert Murdoch-owned tabloid the News of the World deepened on Thursday after reports that relatives of dead soldiers may have been targeted.

The families of troops killed in Iraq and Afghanistan said they were appalled by reports in The Daily Telegraph that their phones may have been hacked by a private investigator working for the News of the World.

Rose Gentle, whose son Gordon was killed while serving in Iraq, said she and other relatives were trying to establish if their phones had been accessed.

"If it is true we think it is pretty disgusting," she told BBC radio.

"By hacking the phones it's like another nightmare, it's just like having a knock on the door again and being told some more bad news."

The Daily Telegraph reported that the personal details of the families of dead British servicemen were found in the files of Glenn Mulcaire, the private investigator at the heart of the scandal.

Murdoch's News International publishing group said it would be "absolutely appalled and horrified" if the claims were true.

The latest claims follow outrage at revelations that investigators working for the News of the World had accessed the phone of 13-year-old Milly Dowler, later found murdered. Families of other murdered children and relatives of the London bombings which took place six years ago on Thursday have also been informed they may have been targeted.

In response to the allegations, the Royal British Legion, a charity which represents military veterans, said it was dropping the News of the World as a campaigning partner.

And in a continuing commercial backlash, energy supplier Npower became the latest company to pull advertising from the Sunday tabloid in the wake of the phone hacking allegations.

A number of major brands have already suspended deals with the newspaper, including motor companies Ford, Vauxhall and Mitsubishi, the Halifax bank and Virgin Holidays.

The Ministry of Defence was seeking clarification of the latest claims from police, who earlier contacted the servicemen's families to warn them that they may have been victims of hacking, The Daily Telegraph reported.

"It would be inappropriate for us to comment whilst this investigation is ongoing," an MoD spokesman said.

In his first statement on the scandal, Murdoch on Wednesday condemned allegations that the tabloid hacked the phones of relatives of murdered children and victims of the July 7, 2005 London bombings as "deplorable and unacceptable".

The Australian-born tycoon said his company would "fully and proactively co-operate with the police", but gave full backing to News International's chief executive Rebekah Brooks despite calls for her to quit because she was editor of the News of the World at the time of the allegations.

It also emerged that Chancellor of the Exchequer George Osborne has been told by police that his name also appeared in Mulcaire's notes.

Prime Minister David Cameron on Wednesday backed calls for a public inquiry into the allegations, but said police should first complete their probe of the "absolutely disgusting" claims.

And he insisted the row should not affect the government's decision, due within days, on whether Murdoch's News Corp. should be able to proceed with its bid to take full control of satellite broadcaster BSkyB.

The News of the World has been dogged by claims of phone hacking since its royal editor and Mulcaire, who was being paid by the paper, were jailed for the practice in 2007.

A new police investigation was launched in January following fresh allegations.