The experienced Clarke, who was finance minister from 1993 to 1997, said he was delighted to be appointed shadow business secretary in a reshuffle aimed at strengthening the Conservatives’ economic team.
One of the party’s leading figures, he will replace Alan Duncan, who becomes shadow Leader of the House of Commons and will now go head-to-head with Peter Mandelson.
“Only a change in government will restore the confidence that is vital for economic recovery,” Clarke said. “It really matters that the Conservative Party wins the next election.
“It matters for our economy; it matters for our society. It is going to be an historically important election and I don’t want to sit on the sidelines — I want to be out on the pitch fighting for the change Britain needs.”
Cameron said Clarke’s appointment would mean the party had “the best economic team”.
“Ken was the last chancellor of the exchequer to lead this country out of recession. He has more experience than Gordon Brown’s entire cabinet,” Cameron said.
Clarke, 68, held a variety of senior cabinet posts in the last Conservative governments under Margaret Thatcher and John Major.
Since the Conservatives lost power in 1997, he has failed in three attempts to win the party leadership.
His pro-European views put him at odds with many in the Conservative Party but Shadow Chancellor George Osborne said Clarke’s return would not cause problems for the party and denied it was a negative reflection on his own performance.
“It strengthens the Conservative economic team and offers the country a real alternative government ready to take office,” he said.
The Tory reshuffle also saw Chris Grayling take over as shadow home secretary replacing Dominic Grieve who becomes shadow justice secretary.
Theresa May was moved to shadow work and pensions secretary opposite James Purnell while Eric Pickles was made party chairman.