Martin Broughton warned Chancellor Alistair Darling not to treat business as the "fall guy" for the credit crunch by creating more taxes or rushed regulation.

Both men were addressing the CBI's annual dinner last night, with the Chancellor saying that the crisis provided the perfect opportunity for a review of the Common Agricultural Policy.

It came as the FTSE 100 Index careered back down towards the 6,000 level as fears over US inflation and record oil prices knocked three per cent off the London market.

The Footsie had been surging to a five-month high, but was hit hard after oil prices rose to yet another record of nearly $130 a barrel, leaving the FTSE 100 184.9 points lower to close at 6191.6.

Billionaire investor George Soros warned yesterday that Britain has yet to suffer the worst fallout from the credit crunch.

He said the world was set for a period of "greater instability" with house prices in Britain likely to fall, and no-one could know how bad it would get. "Over the last 60 years we have had a pretty stable situation and I think we are entering a period of much greater instability, because we have got the threat of recession and at the same time the threat of inflation."

Speaking at a gloomy annual dinner of the Confederation of British Industry, Mr Broughton, who is also chairman of British Airways, said: "If we wanted to talk ourselves into a recession, it would not be hard to start the conversation."

Urging banks not to respond to the crunch by becoming overly risk averse, Mr Broughton said: "It is vital to the lifeblood of the economy that good business opportunities are backed and not starved of the funds they deserve. Don't ask for the umbrellas back now it's raining – start handing the umbrellas out instead."

Addressing the Chancellor directly, Mr Broughton warned him against making knee-jerk or overly burdensome changes to tax, and cautioned that "regulation can create a crisis as well as fix one".

He added: "What business wants from the system of corporate taxation in Britain is clarity, certainty and competitiveness. What we are getting is cost, complexity, and capriciousness."

Speaking at the same event Mr Darling said he remained "optimistic about the underlying strength and resilience of the British economy – and confident that we will get through this difficult time".

He added: "At this time perhaps more than any other, it is right to look again at the Common Agricultural Policy.

"It is unacceptable that at a time of significant food price inflation, the European Union continues to apply very high tariffs to many agricultural imports.

"The European Union has a clear responsibility to play a full role in the international community's efforts to address the consequences of spiralling food prices, but it also has a responsibility to its own citizens to ensure that its policies do not unnecessarily inflate the cost of food."

Earlier yesterday Shadow Chancellor George Osborne said that exempting foreign profits from tax could increase competitiveness and boost future receipts from corporation tax.

He accused Chancellor Alistair Darling of "dithering" over the issue and said he was damaging the competitiveness of Britain as a location for multinationals by creating uncertainty over the future of the tax system.