BUSINESS leaders have warned Labour’s radical plans for nationalisation and worker share ownership could “clobber” companies and hit the nation’s prosperity.

John McDonnell in his keynote address to conference won a rapturous welcome for his pledge to renationalise a swathe of sectors from water and energy to rail and the Royal Mail.

"Let me make it absolutely clear that the full weight of the Treasury will be used to take on any vested interests that try to thwart the will of the people. We will drive this policy through," he declared.

The Shadow Chancellor also made clear that a Labour government post-Brexit would have to take some significant measures, telling delegates to applause: “The greater the mess we inherit, the more radical we have to be.”

He unveiled plans for a cull of water company bosses south of the border after renationalisation with executive and director level jobs to be re-advertised on "dramatically reduced" salaries.

Denouncing the "scandal" of a privatised industry which has paid out £18 billion in dividends while bills rose 40 per cent in real terms, Mr McDonnell set out plans for a new system of Regional Water Authorities in England made up of councillors and worker, consumer and environmental representatives.

He explained shareholders in the existing private companies would be compensated with bonds in a way which would be "cost neutral" for the taxpayer.

But Labour later made clear that payments to shareholders could be slashed if there was evidence of asset-stripping, pension fund deficits or state subsidies since privatisation.

Aides could also not rule out compensation being forfeited altogether in such cases.

Mr McDonnell also confirmed plans to put workers on company boards and create Inclusive Ownership Funds to hand 10 per cent of private-sector firms' equity to employees, who stand to pocket annual dividends of up to £500.

"After decades of talking about industrial democracy, Labour in government will legislate to implement it," he declared.

And the Labour frontbencher announced plans to bring together institutions such as churches, unions and pension funds in a shareholder campaign to put pressure on companies to stop avoiding taxes.

"We'll be demanding companies sign up to the Fair Tax Mark standards, demonstrating transparently that they pay their fair share of taxes. So the warning to the tax avoiders: the game is over. Over," he insisted to applause.

But the business group the CBI warned that Labour’s proposed policies would result in a drop in living standards for workers and customers.

"Labour must meet business halfway or they will crack the foundations of this country's prosperity," warned Carolyn Fairbairn, its Director-General.

"From renationalisation to dilution of shares, Labour seems determined to impose rules that display a wilful misunderstanding of business. Their policies would immediately reduce the value of shares owned by ordinary people by over 10 per cent and hobble UK ambitions to compete on a global stage. That's a double whammy for people's pensions and savings,” she added.

Stephen Martin of the Institute of Directors insisted business was not the enemy.

“There are plenty of areas - from skills to governance - where business and Labour can work together to ensure that the economy is able to meet the pressures facing firms large and small over the next few years. But clobbering employers at a time of unprecedented uncertainty would be a poor way to start that collaboration,” he said.

Adam Marshall, Director General of the British Chambers of Commerce, added: "Labour's proposals are both a tax grab and an unprecedented overreach into the way many of our businesses are run."