Digby Jones, director general of the Confederation of British Industry, said that he had wrongly "accentuated the negative" in criticising the proposals being drawn up by Mike Tomlinson, the former chief inspector.
Company directors were not "implacably opposed" to the diploma, he said.
In February, Mr Jones captured the headlines with his warning that the new qualification would "destroy" respected exams.
It would damage education by distracting the Government from the real priority of improving basic literacy and numeracy, he said.
This week, however, Mr Jones told the House of Commons education select committee that he had concentrated too much on the perceived negatives of the Tomlinson proposals.
Employers were "150 per cent" behind Mr Tomlinson's attempt to improve vocational training in schools.
They also backed his plan to insist that youngsters pass at least maths and English GCSE-grade C level in order to qualify for the diploma at its highest level.
However, Mr Jones said there was still a danger that the educational establishment could lose sight of its biggest priority - raising basic literacy and numeracy standards - if the reforms were mismanaged.
The concession is a significant fillip for the Tomlinson plans, which must satisfy employers if they are to succeed.