IN a stark warning to British industry Lord Mandelson, the business secretary, has said there is no “blank cheque” to rescue troubled firms.

Mandelson said in an interview with The Sunday Times it was up to individual companies to sort out their own future if they ran into trouble: “Those that have invested and lent money to businesses have the first responsibility and self-interest in helping firms survive.

“Businesses faced with trouble will need to look at restructuring, debt will need to be rescheduled and sometimes debt will need to be swapped for equity,” he said.

And he warned: “We will not be supporting companies with flawed business plans and companies with no prospect of recovery.

“It will need to be clear that the government is acting as lender of last resort. We are not going to step in when banks and other lenders are capable of doing it themselves.”

This will come as a blow to Britain’s car industry which has already asked the government for help. Jaguar Land Rover, owned by the Indian conglomerate Tata, wants a £1 billion bailout and Vauxhall, owned by General Motors, is also asking for financial aid.

However, Mandelson has not closed the door completely on the car industry. He said that, faced with “potentially the worst economic situation for generations”, there may be cases that justify an exception to the rule.

Companies that fall into this bracket are those where the collapse would have a dramatic effect on an area in terms of unemployment and falling business confidence.

The other exception is businesses that specialise in areas that Britain will need if we are to become a “more broader-based knowledge-driven and low-carbon economy”.

Mandelson declined to identify to which sectors this would apply, but it is thought that businesses which focus on the creation of “green collar” jobs would be given a high priority.

He said: “We will look at cases that are either so big and will have such a public impact or a business that has such potential and technological capability that we would want that company to survive in order to make a strong future contribution.”

The responsibility for deciding whether companies fall into either bracket will fall to the shareholder executive. However, Mandelson stressed: “There is no open cheque-book but a series of tough tests.”

He said there was not a queue of companies outside his door. “I don’t expect such a queue to form and one will not be welcomed. But it is known that firms in the automotive sector have had discussions with us,” he said.

“We have made it clear they need to look to alternative sources of lending before they can expect a response from the government.”

Tomorrow Mandelson will meet senior bankers to see what they are doing to help small businesses that are in trouble.

Separately, John Denham, the secretary of state for skills, is urging companies that are moving to short-time working to use the spare capacity to train their staff.

He is calling on companies that are introducing shorter working weeks or planning to have periods of downtime to work with their local colleges and Learning and Skills Councils to develop training programmes which can help companies to survive the recession more effectively.

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