LONDON (Reuters) - The government should engage in a more active industrial policy to help businesses survive and emerge from the recession, Business Secretary Peter Mandelson said on Wednesday.
He added that he would use a lecture in two weeks to set out a route map of what he believed British industry wants from the government.
“We need to focus on areas of policy like technology, skills, regulation and investment and export markets - and how we set the relevant conditions for business success in these areas,” he said in a speech to the Chatham House thinktank.
Financial services, one of the motors of British economic expansion in recent years, has been hard hit by the credit crunch, underlining the importance of diversification.
But manufacturing is also doing badly, shrinking at a record pace in November, according to purchasing managers’ data from Markit/CIPS this week.
Mandelson said the key to achieving the right policy framework was not to abandon a commitment to the free market, but to “manage the system so as to minimise and deal with the shocks.”
“Public policy, including a more active industrial policy, has, I believe, a role in ensuring that the market functions effectively as a means of maximising our economic potential in the long term - which it does not always do on its own.”
However, Mandelson said that while the government was trying to support enterprise, the business community viewed these efforts as “insufficiently joined up and often overlapping.”
On Saturday he told a conference that this would not involve mass bailouts of businesses that ran into difficulties.
Mandelson said on Wednesday that Britain’s economic fortunes were at a “critical juncture” and warned that the government could not afford to underperform.
“We will repair our banking system and we will get through the downturn. But on the other side we will encounter an even tougher place to do business in — albeit one with huge opportunities — and we need to be fully prepared.”
He said he wanted the government to focus on helping sectors such as green technology and nuclear power.
“We want the UK and Europe to be the best place in the world to develop and implement low-carbon solutions and a magnet for new green-collar jobs,” he said.
“If China and India are going to need half a billion low carbon vehicles in two decades time - we must be working very hard to ensure that British companies are helping to design and make them.” (Reporting by Frank Prenesti; Editing by Ron Askew)