Don't retreat, Mandelson tells firms

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Business Secretary Lord Mandelson - who earlier warned the Royal Bank of Scotland over excessive bonus payments - conceded that manufacturing was going to have a "tough year" in the wake of the global crisis of credit and demand.

He told the CBI's manufacturing dinner in Birmingham: "In a recession there is always a temptation to retreat into economic protectionism or economic nationalism. A temptation to turn an entirely understandable and legitimate anxiety about jobs and livelihoods in the downturn into an argument against openness to trade or labour mobility.

"These things drive our economy in the good times, they need to be preserved in the tough times.

"We have to address the public's anxiety and frustration, and defend the law. But the solution is not to pull the door shut."

Lord Mandelson had earlier told Royal Bank of Scotland bosses they risked alienating the public by offering "exorbitant" bonuses to its traders and senior bankers.

The troubled bank - which is being propped up with £20 billion of public money - was preparing to make payouts to thousands of the firm's senior staff, according to a press report.

Lord Mandelson said: "What I would say is please be mindful about how this looks and what public opinion will be."

He said the bank must strike a balancing act between keeping its best staff while considering public opinion.

He added: "Obviously you have to work in a market where you have got to recruit the best people, keep the best people in place and motivate them. But they have also got to consider how it looks and how it seems when those mistakes and losses have been made."