A campaigner uses her face as a placard

David Rosser, director of CBI Wales, said many companies were seriously concerned about the costs involved.

Speaking on BBC Wales' Maniffesto programme on S4C, he said there was little demand from customers for increased Welsh language services.

His comments came as protesters calling for a new Welsh Language Act vowed to step up a campaign of direct action.

The Welsh Language Society, Cymdeithas yr Iaith Gymraeg, has demanded new legislation, giving Welsh equal status with English in the private sector.

Currently, all public bodies must provide a bilingual service, but some campaigners want to see the same rules extended to include private companies.

Mr Rosser argued that it should be for customers and companies to decide which language they wanted to use - not government.

"Some of the larger companies have looked at the Welsh language schemes they operate now, on a voluntary basis, compared them to the kind of language scheme that the public sector operates, and calculated costs would increase 10-fold increase," he said.

"If there is a big enough demand from consumers in Wales, they can make that demand known and the companies can respond or not.

"In a competitive market, individual companies and their customers should decide the language in which they want to interact - not government.

Mr Rosser is concerned firms might avoid Wales

Mr Rosser had warned that companies may be put off setting up operations in Wales if they saw it would mean increased costs.

Many businesses in Wales were using Welsh far more than they used to, and they were doing so in a spirit of goodwill with the support and encouragement of the Welsh Language Board, he added.

Owen Evans, head of policy and communications for Wales for BT, said too few people were making use of existing Welsh language services.

"What we find difficult is to get people to use the Welsh services we offer," he said.

"It is essential that people use these services. If we find we are spending big money - and it is big money - and people don't use it, businesses are going to start asking, 'Why are we doing this kind of thing?'."

On Saturday, around 200 demonstrators rallied in Cardiff, demanding much stronger legislation to protect the language.

The event, led by the Welsh Language Society, Cymdeithas yr Iaith Gymraeg, took place outside Welsh Assembly Government buildings in Cathays Park.

Speakers included Caernarfon MP Hywel Williams, historian Hywel Teifi Edwards, and poet Mererid Hopwood.

Catrin Dafydd, chair of Cymdeithas yr Iaith's Language Act campaign said: "There is by now over a decade since the old language act was passed and it's powers do not do enough to protect the rights of Welsh speakers in a world that is changing rapidly."

Around 200 took part in the protest

The society recently launched a new drive for action. The slogan "Deddf Iaith - Dyma'r Cyfle" (Language Act - the only chance) was painted on the walls of the Welsh Assembly Government headquarters in Cathays Park, Cardiff.

The group announced that direct action would continue in the weeks leading up to Christmas.

First Minister Rhodri Morgan told protesters back in August that he would not be influenced by their actions.

He said that, despite the planned abolition of the Welsh Language Board, he believed the language was far better served by goodwill rather than complusion.

Hywel Williams MP said he would be raising the matter in the House of Commons.