The warning from the Confederation of British Industry coincided with a strong attack on the hostile atttitude to European Union membership displayed by many UK politicians.
The CBI said the "fog of rhetoric" risked further reducing the UK's credibility as a negotiating partner in Europe and was deeply damaging to Britain's business and economic interests. The employers' organisation also warned that jobs and inward investment were at risk from the UK's "increasingly semi-detached role" in Europe.
Only a fortnight ago the CBI was dismissing the row over the EU's beef ban as no more than a "spat" between members of a club and rejecting suggestions that it would have any impact on British business interests. But at a CBI Business in Europe seminar yesterday, attended by the Deputy Prime Minister, Michael Heseltine, business leaders queued to criticise the Government's stance in blocking day to day business in Brussels, including a number of directives the CBI has fought to get enacted.
Sir Colin Marshall, the chairman of British Airways and the new president of the CBI, said: "We hope we are going to see a satisfactory ending to the cattle issue and see the Government co-operating. The longer it goes on the more harm it will do to British interests in Europe."
The criticism was stronger from Niall FitzGerald, chairman-designate of the giant Anglo-Dutch foods group Unilever and chairman of the CBI's Europe committee. He said he did not have enough knowledge to comment on the merit of the "confrontation politics" being employed by the Government.
But he added: "I can say that this affair has not helped British business in Europe and, if continued, it would be harmful and disruptive to those of us who represent the more than 50 per cent of British trade which relates to Europe."
Mr FitzGerald also warned of the damage that careless talk about Britain leaving the EU could cause, saying it would expose the country to "regulation without representation". The UK's interests were best served, he added, by ensuring it had effective influence on the shaping of Europe.
"Is Britain more likely to achieve these goals by arguing from a position of trust at the heart of Europe or by carping from the sidelines?" he asked.
The attack was taken up by the chairman of BT, Sir Iain Vallance, who said that business needed a government which was unequivocal in its commitment to Europe.
"We have to know that we have our Government behind us, not minded to pull the rug from underneath us," he added.
Sir Iain also argued that what Brussels needed was more, not less, power over national governments in certain areas.
In particular he said that its competition directorate should have greater power over national authorities while some form of "supra-national monetary discipline" might be necessary to achieve greater monetary stability.
Sir David Simon, chairman of BP, one of the business community's most prominent Euro-philes, said his company would welcome the creation of single currency provided convergence criteria were not relaxed.
Earlier Mr Heseltine, one of the Cabinet's most prominent pro-Europeans, defended Britain's right to protect its own interests as any nation state in Europe would.
But he also stressed the importance for business of Britain remaining at the centre of Europe and dismissed those who suggested withdrawal or membership instead of the European Economic Area as an option.
"It would relegate us to second-class membership of Europe. It would force us to obey rules we had no part in forming and no opportunity to change. A curious prescription from those who claim they want to enhance British sovereignty.
"Britain is going to stay in the European Union. We are going to build from within a Union the British people can be comfortable with."