Vince Cable's career was hanging in the balance today after it was revealed that the business secretary told two undercover reporters he had "declared war" on Rupert Murdoch and said: "I think we are going to win."

His Labour shadow, John Denham, said the business secretary's comments, which referred to his intervention on public interest grounds in News Corporation's bid for full control of BSkyB, should raise "grave doubts" for the prime minister, David Cameron, over Cable's integrity and judgment.

Denham said Cable should go. "It is very difficult to see how David Cameron and Nick Clegg can continue to have confidence in him as business secretary," he said.

Whilae a Lib Dem peer insisted that Cable would stay in his post, there were reports that Cable was called in to see the prime minister after Robert Peston of the BBC revealed in full Cable's comments, parts of which had not been published by the Telegraph.

According to Peston, Cable was recorded telling the reporters, who posed as constituents: "I am picking my fights, some of which you may have seen, some of which you may haven't seen [sic]. And I don't know if you have been following what has been happening with the Murdoch press, where I have declared war on Mr Murdoch and I think we are going to win."

The remarks appeared to prejudge the outcome of Ofcom's investigation into whether the bid should be investigated on media plurality grounds, which was ordered by Cable. Ofcom is due to report by the end of the year.

News Corp was quick to condemn the comments. A spokeswoman said: "News Corp is shocked and dismayed by reports of Mr Cable's comments. They raise serious questions about fairness and due process."

New Corp is believed to have been encouraged earlier today by the European Commission's decision to clear the bid on competition grounds.

Peston told the BBC News channel: "It's extremely clear that News Corp will say categorically that he [Cable] cannot now make the decision on this takeover. If he can't, either they have to find a mechanism for someone else to make the decision or he has to resign. Those are the only options for Mr Cable. He has to do quite a lot of explaining quite quickly."

Peston, who was previously City editor of the Sunday Telegraph, said he was passed the transcript by a whistleblower "who is upset that the Telegraph chose to omit these remarks".

Cable was quoted as telling the Telegraph's undercover reporters: "I have blocked it using the powers that I have got and they are legal powers that I have got. I can't politicise it but from the people that know what is happening this is a big, big thing.

"His whole empire is now under attack ... So there are things like that we do in government, that we can't do ... all we can do in opposition is protest."

The comments were revealed by the BBC minutes after David Cameron and Nick Clegg appeared at a joint press conference, during which they had played down other comments made by Cable, which were published in the Telegraph this morning. Cable told the reporters he could "bring the government down" if he was "pushed too far".

He said being in the coalition was "like fighting a war" and that he could use the "nuclear option" of quitting. He also criticised the speed at which the coalition was attempting change, saying the government was trying to do "too many things" .

Cable, the highest-ranking Lib Dem member of the coalition after Clegg, the deputy prime minister, said last night he was "embarrassed" by his remarks but had no intention of resigning.

Asked at the press conference whether he was personally embarrassed at Cable's behaviour, Clegg said: "He himself has said he was embarrassed by the comments he was reported as saying and I can totally understand why he was. End of story."

Cameron signalled he had no intention of ousting Cable after telling an "end of term" press conference today that the business seceretary "was very apologetic at Cabinet this morning".

Telegraph Media Group is part of an alliance of rival media organisations, with the publishers of the Guardian, Daily Mail and Daily Mirror, opposed to News Corp acquiring the 61% of Sky it does not already own.

Lib Dem peer Lord Razzall rallied to Cable's defence. "He hasn't massed his troops on the borders of Twickenham to invade Osterley," he said. "What he means is he's exercised the powers he has to refer the matter to Ofcom, Ofcom will make a recommendation and presumably he will follow whatever recommendation Ofcom comes up with. He's just done it in a very hyperbolic way."

Razzall said News Corp could be confident that Cable would be especially even-handed now that these comments had come to light. Asked whether he could remain business secretary, Razzall said: "Absolutely. I have no doubt that he can and I've no doubt that he will behave properly and be seen to behave properly.

"It's not him that will make the recommendation. It's a totally independent body, Ofcom, who will make the recommendation that I assume he will follow."

The peer added: "If I was News Corp or BSkyB, I would think this means there is going to be an even more objective look at the decision than otherwise because the one thing that will be absolutely clear is that he cannot be shown to show any bias against them, particularly in view of what he's said."

But Denham said Cable must "immediately step aside "from any involvement with the decision on News Corp's bid to take total control of BSkyB. Every company - big or small - that comes up in front of the competition authorities has a right to know that their case will be heard dispassionately and judged on its merits. Vince Cable, with these extraordinary remarks, has clearly shown he is unable to do that."