Thompson, speaking at the British Council for Offices' annual conference in Berlin last week, said the new policy of refusing to tie aid to commercial ventures meant that UK contractors were not competing on a level playing field with continental rivals.
Other European governments have retained the policy of tied aid, by which developing countries are obliged to buy-in services or products from the donor country.
The Department for International Development, which controls the UK's foreign aid, decided to scrap this practice at the start of the year. This means that contractors have to tender for the projects through the European Union's Official Journal, in competition with all other firms in the single market.
Thompson, who has led Department of Trade and Industry-sponsored taskforces to Kosovo and Serbia, claims that continental countries are already benefiting from tied aid in the Balkans. He said Danish, French and Norwegian firms had won contracts in the water and power sectors.
Thompson said: "I do not object to this style of aid outright. But it is much easier for companies to obtain work through tied aid because they only have their own nation to deal with as opposed to having to tender for work through the European market."
He said the government's decision to break the link between aid packages and commercial ventures would affect contractors' ability to win bigger contracts in states such as those in the former Yugoslavia.
He said: "We have done very well so far, but the next phase is going to be much more difficult."
A spokesperson for the development department said the decision to scrap tied aid had been taken because it did not provide value for money.
The spokesperson said: "It is more efficient to untie the aid. It means it goes to more people who need it. The aid should not be on the back of the giver providing a proportion of goods."
The spokesperson added that members of the Organisation of Economic Co-operation and Development were planning to reduce the amount of tied aid given to developing countries, which would go some to way levelling the playing field.
Thompson said Serbian taskforce members such as Amec and Mott MacDonald had successfully completed water, environmental and energy projects in the region.
