England's Chief Inspector of Schools is today accused of abandoning "objectivity and independence" in his handling of the Trojan Horse scandal and of "tarring" a generation of Muslim children with "the brush of extremism".

In a coordinated attack city leaders, officials and businessmen in Birmingham said Sir Michael Wilshaw's "ill-advised and ill-informed" approach to "isolated" problems in the city had damaged community relations and led to a teacher recruitment crisis.

They suggest the Chief Inspector is attempting to deflect attention from Ofsted's failure to identify problems in schools they previously judged "outstanding".

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"While we have no intention of belittling the serious issues at play, Sir Michael has crossed the line from [giving] independent advice on the schools system to a full-on attack on the city of Birmingham," said Jerry Blackett, chief executive of Birmingham Chambers of Commerce. "The Chief Inspector of Schools should be motivated by overall improvement for the children of the city. His tirades appear to be motivated either by politics or self-publicity, or both."

He went on to accuse the Ofsted head of deliberately trying to damage Birmingham. "Sir Michael forgets that these public and high profile attacks go way beyond supporting the city in improving schools performance, safeguarding or governance. He entirely ignores the numerous success stories and positive examples from the area to focus on the negative experiences of a minority."

Until now, senior figures in Birmingham have remained diplomatic in their comments about Ofsted's Trojan Horse investigation, despite private misgivings about its remit, method of inspection, and findings.

Last week, however, Sir Michael used an appearance before MPs to lay the blame for problems found in five Birmingham schools squarely at the door of the city council. Now senior local government officials and politicians have accused Sir Michael of deliberately misrepresenting problems with governance in a small number of schools by associating them with a wider threat of Islamic extremism.

"We've had to deal with a national political agenda that has deliberately conflated religious conservatism with an extremist agenda that is all to do with radicalisation and violent extremism," said Mark Rogers, chief executive of Birmingham City Council. "It doesn't reflect the issues that are going on in our schools.

"Sir Michael appears to be unclear about the delineation between him as Her Majesty's Chief Inspector appointed by the Privy Council to provide independent assessment and getting involved in politics.

"He has not observed the distinction between that role and making quasi-political commentary."

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Mr Rogers, a former head teacher himself, who only took the job in Birmingham after the scandal broke added: "I am seeing things which I have seen over 25 years of being in the business which are now being packaged as an extremist agenda as opposed to good old-fashioned bad governance and mismanagement."

Speaking before the Education Select Committee last week, Sir Michael said Ofsted had found evidence of a deliberate, orchestrated attempt by some governors to target schools in Birmingham that had resulted in the removal of head teachers and staff being threatened. This, he added, "made children vulnerable to extremism". He accused Birmingham City Council of being "pretty useless" and said there had been a "lack of confidence in Birmingham council to support head teachers" before the Trojan Horse claims.

But Mr Rogers pointed out that there was evidence head teachers were raising concerns at exactly the same time when Ofsted was judging a number of the schools concerned as outstanding. Mr Rogers added that four out of the five schools placed in special measures by Ofsted were academies – institutions over which the city had no legal right to inspect or intervene in, as they were entirely independent of local authority control and reported directly to the Department for Education.

And he said Ofsted's combative approach had set back community relations in the city. "Our communities take a very simple view of this: they hear that this is the behaviour of extremists and our Muslim communities feel themselves being tarred with the brush of extremism by big national figures. They are hugely concerned about that, feeling very defensive and, in some instances, are worried about whether there will be repercussions from other parts of the community who will believe a narrative that does not have any substance to it."

Brigid Jones, who is responsible for education on Birmingham City Council, said Ofsted's stance had hurt both children and teachers. "He's not talking about the Birmingham that I know," she said. "He says Birmingham schools are dysfunctional but when you look at our results, we are way above the national average. Our kids are really worried about what their schools will look like on their CV. They think people will think they've got a bomb in the backpack. We've also got real recruitment problems with teachers. We can't recruit governors either. We are really unrepresented with ethnic minority governors but no one wants to go anywhere near us now – especially Muslims – because they just feel under attack and under suspicion. Mr Wilshaw's comments are just going to make that worse."

An Ofsted spokesperson said: "Ofsted stands by the content and conduct of these inspections. The inspection team were highly experienced and carried out the inspections with integrity and professionalism. The findings and judgements went through a robust and thorough quality assurance process to ensure findings were supported by evidence."

Labour's business plan

The next Labour government will create a nationwide network of "enterprise governors" who would provide schoolchildren with the knowledge and skills needed to set up their own businesses, it emerged last night.

The idea, which has the backing of the Federation of Small Businesses (FSB), will involve entrepreneurs being assigned to individual schools to give careers advice and practical help. The governors would be aimed at those children who are not attracted to the academic route of A-Levels and university.

Labour-run Waltham Forest council already operates a network of enterprise governors for its local schools, with the help of the FSB. Earlier this month, the Labour peer Lord Adonis, in his report on economic growth, recommended fostering greater links between schools and businesses, with the idea of a "Teach Next" scheme, modelled on the highly successful Teach First project, to attract mathematicians, scientists and engineers from industry into teaching.

Toby Perkins, the Shadow Minister for Small Business, said yesterday: "We need to see more people starting, leading and working in business. And a key part of fostering an entrepreneurial culture is by strengthening links between schools and local firms.

"Waltham Forest's scheme has made a fantastic contribution, showing what a difference a trailblazing Labour council can make. The next Labour government will make it easier for local authorities to take forward similar plans."

A Labour government would not force schools to adopt enterprise governors but it would encourage councils to use FSB-backed entrepreneurs to help get pupils interested in running their own businesses.

The FSB is working with the national charity School Governors One Stop Shop to encourage members onto schools' governing bodies.

The proposed enterprise governors would work alongside parent and teacher governors.

Figures show that many children are leaving school without any financial education or awareness of the world of business. The new national curriculum is introducing financial education for the first time in England from this September.

Jane Merrick