UK will emerge stronger - Mandelson

In a speech in the City of London, he said he believed the fundamentals of the economy would be borne out when growth returned.

But the shape of the UK economy and the relationship between the private and public interest would need to change and there would have to be a "politics of reconstruction".

Lord Mandelson said there would be constraints and opportunities in the next decade, with controls on public spending and a renewed focus on public sector reform and productivity.

"That's one of the reasons why the Government made the decision to push ahead with modernisation of the Royal Mail, because an unreformed service is a drag on public resources at a time when every pound matters more than ever," he said.

"It means, I believe, some basic choices about where and how we invest public money, and there is no priority more fundamental than the return to growth, and a balanced economy for the future. That underwrites everything else."

The minister said private enterprise would drive the UK's future success and competition would keep the country "lean and innovative", and he repeated the case against British protectionism.

"British companies thrive in, and depend on, an open European and global market, and the same is true for any European country or company."

Lord Mandelson said that despite the current economic downturn, the UK's strengths built up over the past had to be recognised, including in the City.

"It is important to recognise that whatever went wrong in some City institutions, the legal and commercial expertise that has developed here has not somehow been wiped away in the last year. They will remain central to the UK economy in the decades ahead, just as they have been for centuries," he said.