David Cameron clashed with one of Britain's richest businessmen as he denounced retailers' "harmful and creepy" efforts to sell sexually provocative clothes to young children yesterday.

Philip Green, owner of BhS, said Mr Cameron must be able to find something "more current" to concern him than attacking a clothing line withdrawn by the retailer more than three years ago.

Mr Cameron had used the example of "padded bras and sexy knickers" for girls aged 10, sold by Bhs in 2003, as an example of "prematurely sexualised" children's clothing.

But Mr Green said the attack was outdated. "Lets hope he finds something more current when he makes his next speech," he said. " Picking an example at random can be misleading and dangerous.

"This concerns garments that went into shops in January 2003. I got a call on 26 March 2003 and they were removed from stores on 27 March and destroyed. Of the several billion pounds of business since 2003, this is not earth shattering news."

The Conservative leader, who has a daughter and two sons, said he would not flinch from speaking out when he sees business acting irresponsibly. "I have no desire to wrap kids in cotton wool," he said.

"Growing up is about finding out what goes on in the real world. But the protection of childhood innocence against premature sexualisation is something worth fighting for. Sometimes I think that our society treats adults as children and children as adults."

Speaking at the annual conference of Business in the Community, he said: "Bhs's initial reaction was to claim that the underwear was harmless fun. That sums up why parents are often reluctant to complain, even when they feel uneasy. No one wants to be seen as uptight or over-protective.

"Actually, it's not just a bit of fun ­ it's harmful and creepy. The marketing and advertising agencies have a term for it: KGOY ­ Kids Growing Older Younger. It may be good for business, but it's not good for families and it's not good for society, and we should say so." His remarks echo his recent criticism of WH Smith for offering "half-price Chocolate Oranges at its check-outs instead of real oranges".

The Tory leader said he was prepared both to "stand up" to business and to "speak up" on its behalf. "I've never believed that we can leave everything to market forces. I'm not prepared to turn a blind eye if the system sometimes leaves casualties in its wake. Unless shortcomings are addressed, the entire system risks falling into disrepute."

Following the launch of an inquiry by the Office of Fair Trading into the grocery sector, he told the conference: "If a supermarket opens a convenience store on the high street and uses its financial muscle to drive down prices until small shops are forced out of business ­ and then immediately puts prices up again ­ we need to complain."

Mr Cameron used the example of Tesco as he said large companies had to behave like good neighbours. He said: "A company like Tesco has countless 'neighbours': the communities where its stores are based; the customers who shop there; the farmers and other businesses that supply the products it sells; the people who work in its stores and offices... You could say that all of us are its neighbours."

Firms that committed themselves to behaving responsibly could be rewarded with a "lighter touch" from a Conservative government on enforcing red tape, he said.