CBI director-general Tony Danker also cautioned against “massive” tax cuts or huge pay settlements that risked “overheating” the economy at a critical stage. He urged politicians to focus instead on boosting firms’ confidence.
His remarks come as many Tories are demanding immediate action to ease the cost-of-living crisis, in a growing civil war over tax.
Mr Danker said: “There’s a very simple chain of events…when business confidence is high, businesses invest and grow, recession is avoided.
“When business confidence falls, investment falls – and it is the only thing at the moment stopping us from recession.
“So anything that can be done to boost business confidence, to demonstrate that actually the Government is incredibly serious and purposeful about growth, will work.
“But if we have a summer of politics like we’ve had in the last week, that will undermine confidence.”
Mr Danker warned, however, that inflation would remain high into the autumn, leading to a “historic squeeze” in household incomes and hitting consumer spending.
Mr Johnson declared economic growth his top priority as he sought to reset his premiership after winning a party vote of confidence in his leadership.
The Prime Minister is facing mounting pressure from Conservative MPs to announce large-scale tax cuts.
Chancellor Rishi Sunak has promised a 1p income tax cut in 2024, but many Tories fear the party cannot afford to leave it that long.
Northern Ireland Secretary Brandon Lewis said he would back bringing it in earlier “when we can afford to do it” and Health Secretary Sajid Javid said it “should be brought forward” if possible.
But former Cabinet minister John Whittingdale said: “I would like to see tax cuts going ahead.
“The Prime Minister has been given the chance to show he is the right person to lead the country through these difficult times.”
Jake Berry, who leads the Tory Northern Research Group of backbenchers, said Mr Johnson risked leading the party towards “political annihilation” if he failed to deliver on policies such as tax cuts.
Lord Frost, who quit as Cabinet Office minister in December, wants tax cuts as part of a policy overhaul.
Shadow chancellor Rachel Reeves said yesterday her priority would be scrapping the recent national insurance rise “right now”, because it was “taking money out of people’s pockets”.