Here’s the good news. Over the past five days Gordon Brown, his chancellor, Alistair Darling, and business secretary Lord Mandelson have been left in no doubt about the desperate state of the economy.

Last Wednesday, Mandelson met the business council, headed by Standard Chartered chairman Mervyn Davies, and luminaries such as Sir John Rose of Rolls-Royce and Tesco’s Sir Terry Leahy.

Then on Friday the trio had breakfast with another group of industrialists, including Brendon Riley, the UK and Ireland head of IBM; James Smith, the chairman of Shell UK; Ian King, chief executive of BAE Systems; and Fernando Gonzalez, European head of cement giant Cemex, as well as Andrew Moss of Aviva.

That is a huge cross-section of voices and it has helped shape ministerial opinion at a critical time. As importantly, it is also ensuring that they don’t see events through the rear-view mirror.

Here’s the bad news. Those that attended are still not sure that the government understands the vital importance of a balanced economy, one that supports manufacturing in the same way it has championed financial services. The tax cuts and spending package in tomorrow’s pre-budget report will provide a short-term boost to the economy, but there are much deeper problems to be addressed.

What remains of manufacturing in Britain is in surprisingly robust shape, particularly those areas that are largely export-driven. But right now the sector needs help and quickly.

The £1 billion loan request from Jaguar and Land Rover (as reported on the front page), which directly employs 15,000 people in Britain, is just one of many it is going to receive in the coming months and government has to be equipped to deal with it. France and Germany are far more aggressive in supporting their own industries and are not worried about concerns the European Commission has about state aid.

If the playing field is being tilted in favour of continental rivals, Brown must follow suit to protect our interests. Unlike the banks, industry is not after a bailout. What it wants is access to bridge finance that can tide it over during the challenging next two years. The loan must be at commercial rates but not the penal rates at which banks are lending to troubled businesses at present.

There are huge opportunities ahead: the creation of a new nuclear industry, dynamic growth in businesses specialising in alternative energy and a global economy more interlinked than ever. But to ensure Britain prospers in it we need to keep the research and development, the government must promote a balanced economy and one that stimulates new jobs in new industries. And we must stop big corporates moving their domiciles overseas. Darling will address the latter problem in his report, but the others must be looked at as well.

Tomorrow’s report will be all about helping small business. It will focus on supporting it through a range of initiatives, recognising that indirect tax cuts are far more effective at stimulating the economy and that jobs need to be preserved at all costs. That is all good and much needed. However, big business needs to be supported with the same vote-winning alacrity that Brown and Darling will pledge for small business. How it deals with Jaguar’s requests will be one of its first big tests.

Trust must be earned

ON the theme of financial help for business, Britain’s big banks will hit back tomorrow at the critics who accuse them of starving the economy of cash at a time when it needs it most. It will be a pre-emptive strike ahead of Darling’s report.

Eric Daniels, chief executive of Lloyds TSB, and Stephen Hester at Royal Bank of Scotland will say their banks are committed to lending to small to medium-sized enterprises. Lloyds will demonstrate it with double-digit growth in the SME area and say it is also one of the most active lenders in the mortgage market and home-repossession is only to be used as a very last resort.

Daniels recognises small businesses face rising material costs and that they are experiencing difficulty accessing trade credit at the same time as seeing a fall in demand. He will tell the government he has no intention of abandoning his corporate customers at a time when they need him most.

The words will have to be supported by action in the coming months — there are too many stories of small businesses being burdened with super-charged interest repayments to let them off that easily. For the time being, banks must accept they will be cast as the villains of the piece and no amount of rational explanation will change that.

Over the past 18 months banks have lost all credibility and it will take years to win it back. Hester and Daniels will start that journey tomorrow.

The big problem for the government is helping those companies that are shunned by banks because they are perceived as too risky, and supporting the small start-ups that need help. Last week I said that ministers were considering creating a state bank. Another idea being mooted is for banks and the government to set up an equity pool and seconding businessmen from private equity to run it. Whether it flies or not remains to be seen.

Steady pair of hands

BARRING any last-minute hitches tomorrow, New York Federal Reserve Bank president Timothy Geithner will be nominated as president-elect Barack Obama’s Treasury secretary. And about time, too. Obama has so far let George Bush’s lame-duck presidency play out without much comment. It’s a situation that has only added to the market’s malaise. Geithner’s appointment finally suggests the outline of Obama’s thinking on the financial crisis.

On Friday, as the news broke, financial markets bounced back, with some ascribing the rally to a Geithner bounce. Who knows what really drives these crazy markets, but it is reassuring that Obama has settled on Geithner. The 47-year-old has a deep, personal experience of the credit crisis. His office played host to Hank Paulson and Ben Bernanke for all those weekend meetings about the crises at Bear Stearns, Lehman Brothers and AIG.

For some that also may be grounds for criticism, but it seems Obama believes that what the markets need more than anything right now is continuity and stability. Let’s hope the new president and Geithner can bring both.

Duffield stands firm

THERE has been much speculation about a predator taking advantage of the collapsed share price at fund manager New Star Asset Management. Unfortunately it is ill-informed. John Duffield, New Star’s chairman, is not selling to the mooted buyers, Aberdeen Asset Management or Henderson — particularly at this price.

The immediate mindset of those in the company is to ride out this downturn, not sell out. More corporate restructuring will be undertaken, which means more job losses and further small disposals. It’s going to take time — the group’s market value of £61m, is some four times less than its debts. At some stage consolidation within the hard-pressed fund-management community is inevitable. But not at the moment.

john.waples@sunday-times.co.uk

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