Instrument from retreating boat on fire (7)
I believe the answer is:
sackbut
'instrument' is the definition.
(early type of trombone)
'retreating boat on fire' is the wordplay.
'retreating' is a reversal indicator.
'boat' becomes 'tub' (tub could historically mean a small boat).
'on' says to put letters next to each other.
'fire' becomes 'sack' (dismiss someone from their job).
'tub' back-to-front is 'but'.
'but' put after 'sack' is 'SACKBUT'.
'from' is the link.
(Other definitions for sackbut that I've seen before include "Ancient musical instrument" , "music-maker" , "Old instrument" , "antique instrument" , "Early form of trombone" .)