Mid Sussex MP Nicholas Soames has denied he made a racist jibe at Jewish retail billionaire Philip Green.

The shadow defence secretary said he was appalled at "exaggerated" reports of a heated incident in a London restaurant, where he was said to have clashed with Mr Green, who owns shopping chains, including BhS and Topshop.

Mr Soames was alleged to have made anti-Semitic remarks as Mr Green lunched with two journalists in a restaurant in Mayfair's Dorchester hotel.

It had been suggested Mr Soames was critical of the fact Mr Green, who has just lost a £12.5 billion takeover bid for Marks & Spencer, was briefing the Press for "nice, cosy chats".

According to reports in several Sunday newspapers, after hearing Mr Soames heckling him, Mr Green called out: "Behave. Who are these people? I should get them chucked out."

Mr Soames was alleged to have shouted back: "Their kind keep it all together, as ever. It's the same as it ever was."

Mr Green, 52, and the journalists took his comments to be a reference to Mr Green's faith. Mr Soames, his brother Jeremy, 52 and another man then left.

One of the journalists, BBC business editor Jeff Randall, was so outraged he is said to have telephoned Lord Maurice Saatchi, the Jewish co-chairman of the Conservative party, to complain.

Talking about reports of the incident, Mr Soames, 56, said: "They are a grotesque exaggeration. I had a very minor exchange of views. Those articles are shameless, inaccurate and exaggerated. I have never said anything anti-Semitic. I never have done and I never would do.

"It's an absurd story, it's diabolical, written by an over-stressed journalist who has lost all sense of proportion.

"What I said is different in each report. There was an altercation; I made a remark, which was apparently blown out of proportion."

Mr Soames refused to clarify what he said to Mr Green. He is said to have rung Mr Randall the next day and apologised.

Mr Green is a rags-to-riches billionaire with a £3.6 billion fortune.

He told reporters after the incident: "Life moves on. They are what they are, these people."