UK business secreatry in war of words over economy with Starbucks CEO

It's rare for a seasoned politician to lose his cool in public, but that's exactly what happened when British Business Secretary Lord Mandelson, the man many credit as being part of the trio which turned around the Labour Party, launched into an abusive tirade against Starbucks chairman and CEO Howard Schultz who had spoken of the country's economy being in a ''spiral of decline.''

Mandelson, who alongwith former Prime Minister Tony Blair and current PM Gordon Brown, had spearheaded Labour's recent ascent in British politics, followed Schultz onto the CNBC show in New York on Wednesday and hit back, saying Britain was "not spiralling, although I've noticed Starbucks is in a great deal of trouble - but that might be because of their over-expansion, given the state of the market."

But speaking later at a diplomatic reception in New York, he is reported to have launched an angry  retort against the Starbucks boss, saying, "Why should I have that guy running down the country?".

He then reportedly used a four-letter word to ask who Schultz was, adding: "How the hell are they [Starbucks] doing?" Asked to comment on the story, a spokesman for Lord Mandelson said: "We don't stand by the language. But we do stand by the sentiment."

Later in the week, Mandelson reiterated that the British economy was not spiralling downwards. However, he did not forget to take a dig at Starbucks.

"There has been a lot of talking Britain down lately, and not only from coffee-shop owners. I understand the severity of our economic circumstances as well as anyone, believe me," Mandelson told business leaders in north-west England.

"But as of today, I'm going to take on the doomsters and only talk Britain up. I do not underestimate the economic difficulties we face in this country. But the UK's open and dynamic economy is a huge asset. We have some of the best-growing small firms in the world and some of the smartest and most skilled workers. Our regulatory environment is efficient and business friendly."

It was vital to identify the technologies that would drive future business growth and have the research and development capabilities to give British industry a competitive advantage, he said. "When I talk about a new industrial activism, I mean aligning government policies that have an impact on business, creating a stable framework of policy within which the private sector can take commercial decisions."

That did not mean creating "some Soviet-style national plan" that would replace decisions by companies with those of ministers, and government picking winners and losers, he insisted. "The government can't stand back, it has an essential role to play."

Mandelson said the development of Britain's industrial base was even more important in the light of what had happened in the financial services sector. ''The banks will recover and restore their international standing and the City of London will reclaim its international role but equally we have to rebalance the economy and diversify.

"Britain is the sixth biggest manufacturing economy. We have to maintain our position in international markets ... identifying new technology drivers and emerging markets that will give us a strong industrial future."

He also defended a government-backed loan scheme launched five weeks ago to channel money to small businesses facing collapse. He said that so far 400 businesses had received loans under the new Enterprise Finance Guarantee, with more than £40 million lent by 23 high street lenders across the UK.

He said the scheme was "on course" to guarantee the additional £1.3 billion in lending over the next year that the Government had promised. "That is what people expect from Government – real help now," Lord Mandelson said.

The Department for Business said that 30,000 other businesses had also taken up the free "health check" service, provided by the government-funded support network Business Link. HM Revenue & Customs has also agreed to defer more than £1bn in taxes due from 60,000 firms under a separate initiative.