Theresa May warned companies would leave the UK if the country voted for Brexit a month before the referendum, it is claimed.
Secret recordings obtained by The Guardian are said to reveal the prime minister's fears about leaving the EU just weeks before the June 23 vote.
In a private event at Goldman Sachs bank, the newspaper claims she voiced her concerns about Brexit in an hour-long session with staff.
"I think the economic arguments are clear," she said.
"I think one of the reasons people invest in the UK is because it is the UK in Europe.
"And if we are not in Europe, I think there would be firms and companies who would be looking to say, do they need to develop a mainland Europe presence rather than a UK presence?
"So I think there are definite benefits for us in economic terms."
The prime minister has now been accused of ignoring her own "dire warnings" about the consequences of a so-called hard Brexit after the recordings emerged.
She has since said Britain should have maximum freedom to trade in the single market - but not at the expense of immigration controls.
Mrs May, who was home secretary at the time, was criticised by members of David Cameron's team for keeping a low profile in the campaign.
Andrew Gwynne, shadow minister without portfolio, said: "As if we needed it, this recording is cast-iron evidence of how Theresa May and other senior Tories have been saying one thing in private about the economic impact of Brexit, and another in the comfort of Tory conference halls.
"It's plain that she recognises what a disaster it would be for Britain to lose access to the Single Market, so why doesn't she be honest with the British people and say how she plans to retain it?"
Liberal Democrat leader Tim Farron said: "It is disappointing that Theresa May lacked the political courage to warn the British public as she did a group of bankers in private about the devastating economic effects of Brexit.
"But far more disappointing is that now she is supposedly in charge, she is blithely ignoring her own dire warnings and is prepared to inflict an act of monumental self-harm on the UK economy by pulling Britain out of the Single Market."
Labour's Phil Wilson, an Open Britain campaign supporter, said: "It's good to know that privately Theresa May thinks what many of us have been saying publicly for a long time - leaving the Single Market would be bad for businesses and for our economy.
"Now she is Prime Minister, Theresa May is in an unrivalled position to act on her previous concerns - starting by putting membership of the Single Market at the heart of her Government's negotiating strategy."