French-style industrial activism should become the way forward for Britain's post-recession economy, according to an industrial strategy to be unveiled by the Government today. New Industry, New Jobs comes two days before the Budget and urges greater state assistance for industries such as biotechnology, high-tech manufacturing, green technology, advanced materials and carbon capture and storage.

Lord Mandelson, the Business Secretary, told The Times: “The Government's job is not to substitute for markets or displace the private sector. If markets fail, or do not work efficiently, the Government has a role to play, as we saw with the financial markets.

“The Government has been successful in creating a favourable overall business environment in the UK through open markets and free trade and keeping the regulatory burden as light as possible.”

He added that the Government must remove barriers holding back business, as other nations were doing.

Among the measures under consideration are the creation of a 3i-style investment fund to offer growth capital to start-up businesses, which would be co-funded by the public and private sectors. 3i, the venture capital fund, was set up in 1945 with £10 million of financing. It has expanded to include £6 billion of assets, including venture capital, buyouts and investments worldwide.

Richard Lambert, Director-General of the CBI, has called for the creation of a 3i-style £1.5 billion fund, along the lines to be spelled out today. Ministers will not promise a specific sum for the fund, leaving open the question of whether it will be implemented.

The plan proposes increasing the roles of the Export Credit Guarantee Department and UK Trade & Investment to boost the promotion of UK goods and services overseas.

The strategy, drawn up by Lord Mandelson with John Denham, the Skills Secretary, reflects a growing recognition that allowing the free market to dictate which industries and technologies succeed has failed. Increasingly ministers believe that, without more centralised planning and direct support, including help arranging access to finance and trade credit insurance, British companies will struggle to compete with rivals from abroad.

The announcement comes as a report published today says that Britain stands to lose £44 billion in annual revenues unless it invests in growth industries. The study from the National Endowment for Science, Technology and the Arts, urges the Government to use this week's Budget to reshape the economy by investing in high-growth sectors. “The Government must invest in areas where future demand will drive next generation technologies,” Jonathan Kestenbaum, its chief executive, said.

Blueprint for growth

Government plans to:

— Focus on key strategic industries with high growth potential, such as advanced engineering, electronics, biosciences and renewable energy Consider creation of 3i-style investment fund to support small and medium-sized start-ups

— Give more support for exporters by enhancing the role of UK Trade and Investment and the Export Credits Guarantee Department

— Make sure the UK maximises economic opportunities from the work of university researchers

— Ensure Britain's education and training system assists long-term economic growth

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