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* Around 2,000 rescued over two days
* Cracks found in building day before collapse
* Canada's Loblaw, UK's Primark had suppliers at site
By Serajul Quadir and Ruma Paul
SAVAR, Bangladesh, April 25 (Reuters) - Employees at a garment factory that collapsed in Bangladesh killing at least 260 people were told to work despite warnings it was unsafe, officials said on Thursday as an unknown number of the more than 3,000 workers remained trapped in the rubble.
Survivors described a deafening bang and tremors before the eight-floor building, where most of the employees were women, crashed all around them. Dhaka District police chief Habibur Rahman said about 2,000 people had been rescued over two days.
Wednesday's disaster refocused attention on Western high-street brands that use Bangladesh as a source of low cost goods. North American and European chains including British retailer Primark and Canada's Loblaw said they were supplied by factories in the building.
"I thought there was an earthquake," said Shirin Akhter, 22, who was starting her day at the New Wave Style workshop, six floors up, when the complex crumbled. Akhter was trapped for more than 24 hours before breaking through a wall with a metal bar. She said her monthly wage was $38.
For a second night, local residents used flashlights and dug with crowbars and their bare hands to find survivors and bodies beneath twisted wreckage of the Rana Plaza building in the commercial suburb of Savar, 30 km (20 miles) outside the capital Dhaka.
They dropped in bottled water and food to people who called out, trapped between floors. Late on Thursday, rescuers forced a hole into a room and pulled out 41 people alive. Still, the death toll grimly rose all day.
Relatives identified their dead among dozens of corpses wrapped in cloth on the veranda of a nearby school. More than 1,000 were injured.
Police said the owner of the building, local politician Mohammed Sohel Rana, was told of dangerous cracks on Tuesday.
While a bank in the building closed on Wednesday because of the warnings, the five clothing companies told their workers there was no danger, industry officials said. Rana is now on the run, according to police.
"We asked the garment owners to keep it closed," said Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Mohammad Atiqul Islam. Instead, Islam said, there were 3,122 workers in the factories on Wednesday.
"An unspecified number of victims are still trapped," said Mizanur Rahman, a rescue worker with the fire brigade, as he clambered over the wreckage. "We can't be certain of getting them all out alive. We are losing a bit of hope."
The government declared a national day of mourning and flags were flown half mast at all official buildings.
Dhaka city development authority had filed a case against the building's owner for faulty construction, Police Chief Rahman said. It filed another case against the owner and the five garments factories for causing unlawful death.
Rana had told proprietors of the building's five factories that the cracks were not dangerous, Islam said. "After getting the green signal from the plaza owner, all the garment factories opened," he said. BGMEA blacklisted the five companies on Thursday.
More than 1,000 textile workers besieged the BGMEA offices on Thursday, pelting it with stones and clashing with riot police, TV channels showed. The workers demanded all garment factories be shut and the owners harshly punished for accidents.
"The deaths of these workers could have been avoided if multinational corporations, governments and factory owners took workers' protection seriously," Amirul Haque Amin of the National Garment Workers' Federation said in a statement.
"Instead, the victims' families must live with the terrible consequences of this tragedy."
U.S. ambassador Dan Mozena said the accident could affect Bangladesh's market access to the United States. Bangladesh is fighting a petition by U.S. unions to revoke preferential trade access because of worker safety issues.
"It certainly makes the environment of the workplace safety questionable," Mozena told reporters in Dhaka.
UK clothing retailer Primark, which has 257 stores across Europe and is a unit of Associated British Foods, confirmed that one of its suppliers occupied the second floor of the building. Danish retailer PWT Group, which owns the Texman brand, said it had been using a factory in the building for seven years.
"We check the working conditions at the factory, but we are not construction engineers. We cannot be held responsible for how they build their factories," PWT director Ole Koch said.
British clothing retailer Matalan said it used to be supplied by one of the factories at the complex but had no current production there.
Canada's Loblaw, a unit of food processing and distribution firm George Weston Ltd, said one factory made a small number of "Joe Fresh" apparel items for the company.
Primark, Loblaw and PWT operate under codes of conduct aimed at ensuring products are made in good working conditions. Documents including order sheets and cutting plans obtained by Reuters appeared to show that other major clothing brands such as Benetton had used suppliers in the building in the last year.
A Benetton spokesman said none of the factories were suppliers to the company. Spain's Mango said it had an unfulfilled sample order with Phantom Apparel, at the plaza.
About 3.6 million people work in Bangladesh's garment industry, making it the world's second-largest apparel exporter. The bulk of exports - 60 percent - go to Europe. The United States takes 23 percent and 5 percent go to Canada.
Hundreds of students donated blood at a clinic in Savar after doctors at Dhaka hospitals said they could not cope with the number of victims.
Mohammad Mosharraf, who was rescued on Thursday after 26 hours, said he had been hit on the head by something heavy and knocked unconscious when the building came down.
"When I regain my sense I found another four colleagues are also trapped under the debris of the building," he told Reuters.
"We desperately tried to shout for someone to rescue us. Initially we didn't receive any response, but we moved to another part of the floor and found some light and heard voices."
The Rana Plaza collapse follows a fire at the Tazreen Fashion factory on the outskirts of Dhaka that killed 112 people in November and another incident at a factory in January in which seven people died, compounding concerns about worker safety and low wages in Bangladesh.
Entry level wages in these factories start at 14 cents an hour, said Charles Kernaghan of the Institute for Global Labour and Human Rights.
After the Tazreen fire, U.S. retailer Wal-Mart Stores Inc said it would take steps to alleviate safety concerns, while Gap Inc announced a four-step fire-safety programme.
Merchandise for both Wal-Mart and Sears Holdings Corp was being made, without the retailers' authorization, at the Tazreen facility when the fire occurred last November.
Wal-Mart said on Thursday that no goods were being made for it at the Rana Plaza facility. It now has a zero-tolerance policy on unauthorized contracting and said it had not learned of any unauthorized production taking place there. Sears said that based on its initial findings, no merchandise was being made for it at any of the factories in the building.
Edward Hertzman, a sourcing agent based in New York who also publishes trade magazine Sourcing Journal, said pressure from U.S. retailers to keep a lid on costs fostered poor conditions.
Hertzman, whose publication has offices in Bangladesh, said New Wave Bottoms was on the second floor, Phantom Apparels the third, Phantom Tack the fourth and Ethar Textile the fifth.
The New Wave website listed 27 main buyers, including firms from Britain, Denmark, France, Germany, Spain, Ireland, Canada and the United States.