Sir Clive Thompson, who takes over as CBI president in July, was especially scathing about the Prime Minister's employment reforms, criticising government interference and the concept of a workplace partnership between employers and trade unions.
The remarks could undermine the warm relationship that Tony Blair has developed with the CBI. Sir Colin Marshall, the outgoing president, had just delivered a speech praising the partnership with New Labour and the stable policies of the Chancellor, Gordon Brown. Sir Clive, chief executive of Rentokil Initial, said that statutory union recognition was something that should be put in a handbook to help firms improve their "pest control" techniques. "On the one hand, the Government is trying to create a positive atmosphere for industrial relations - the 'third way', based on partnership. But then one of the partners is forced to the table."
His comments, delivered at the CBI annual dinner late on Wednesday night, were widely seen as a throwback to Thatcherism and were doubly provocative since Mr Blair was sitting next to him at the time. The general secretary of the TUC, John Monks, was also at the event and was said by one observer to be "spitting blood" afterwards.
Sir Clive poured scorn on the idea of partnership and the concepts at the core of the Government's Fairness at Work proposals. "It is people as individuals who build great businesses, not markets, assets, brands, governments, not people collectively but people as individuals through their leadership, determination, self-belief and commitment," he said.
His comments jarred with the speech given just a few minutes beforehand by Sir Colin Marshall, chairman of British Airways, who spoke of the "evolving partnership between Government and business" and praised Gordon Brown for the way he saw eye-to-eye with business on the need for stability and sustainable economic development.
Sir Colin added that the CBI and the Government enjoyed a "largely mutual philosophy". In its formal response to the Fairness at Work White Paper, the CBI's director general, Adair Turner, described the Government's approach to statutory union recognition as "workable".
Sir Clive's comments also shocked large numbers of the 1,600 business leaders attending the dinner. One said his speech was " off the wall and completely out of line". Another said it was "badly misjudged".
Pierre Jungels, chief executive of Enterprise Oil, said: "I found the speech very curious. It surprised me personally that the CBI is shifting from a president tuned into the new thinking to one who sees things so differently."
Sir Colin maintained yesterday that Sir Clive had done a good job in bringing the evening to a close and seemed taken aback that the speech had provoked such a strong reaction.
The Rentokil chief will take on the CBI presidency for two years, during which time he will be the principal spokesman for British business and charged with the task of presenting its views in Downing Street.
David Chidgey, the Liberal Democrat trade and industry spokesman, was at the dinner but assumed Sir Clive's comment about pest control was a joke. "If you read it cold then it's a pretty Neanderthal remark. It's like going back to the Dark Ages and it underlines the fact that the CBI have always been opposed to statutory union recognition. That's been the case for as long as anyone can remember and that's the way they have started into the consultation with the TUC."