Lord Mandelson’s famed silver-tongue deserted him on a business trip to New York when he responded with a four-letter tirade against one of America’s most senior entrepreneurs, the Starbucks boss Howard Schultz.

The American, chief executive of the world’s biggest coffee chain, spoke of his corporation’s recent struggles in a television interview. “The concern for us is western Europe and specifically the UK,” he said. “The UK is in a spiral.” Mr Schultz described consumer confidence in Britain was “very, very poor”.

The furious Business Secretary resorted to an uncharacteristic Anglo-Saxon turn of phrase, storming at a cocktail party in New York: “Why should I have that guy running down the country? Who the fuck is he?”

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Lord Mandelson added a withering comment on Starbucks’ assessment of the UK economy, adding: “How the hell are they doing?”

Starbucks plans to close 900 of its 16,000 outlets worldwide as consumers buy fewer £2-a-time lattes and mochas.

Lord Mandelson, on a brief visit to New York to bang the drum for British business, overheard an interview by the normally-careful Mr Schultz, and the Business Secretary’s face reddened.

In a public interview on the CNBC TV station, he used less fragrant language but was no less damning in his comments: “The UK is not spiralling, although I have noticed that Starbucks is in a great deal of trouble. But that may be because of their over exposure given the state of the market. So please do not project Starbucks on to the UK economy as a whole.”

As communications chief of the Labour Party in the mid-1990s, Lord Mandelson guided Tony Blair to power in 1997 by softening the party’s image, famously introducing its red rose emblem and backing well-groomed politicians to represent the party on television. As Northern Ireland Secretary and Trade Secretary, his delivery was rarely less than polished, in public at least, and he has continued to be an exemplar of diplomacy since he returned to the Cabinet last year.

He was less guarded at an official reception at the British consul’s residence in New York, where he swore about the company, which has two million customers and 713 stores in Britain.

Lord Mandelson, in the US to counter the fears of investors who were receiving too gloomy a picture about Britain’s economic prospects, was unrepentant about his outburst, although he conceded he did not need to swear.

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His spokesman told The Independent: “We stand by the statement, but we don’t stand by the language.”

Starbucks later said that Mr Schultz had not intended to do down Britain, which is its third biggest market after the US and Canada.

Lord Mandelson’s comments prompted a conciliatory response from the coffee chain, which said in a statement: “It is a difficult economic situation in the US and around the world. Please be assured that Starbucks has no intention of criticising the economic situation in the UK.” The Seattle-based company added: “The reality of the global economy is that no country is immune to the difficulties. We are all in this together and as a global business we are committed to each and every market we serve.

“Starbucks has been committed to the UK since it arrived in 1998. Today, the UK is one of its most important markets with over two million customers welcomed in more than 700 coffee houses every week nationwide.”

However, its stores have been undercut by cheaper fast-food outlets and pub chains, which have made a pitch for the mid-morning coffee break with cheap filter coffee. Starbucks also faces competition from rival chains and, unlike in the US, it is not the biggest coffee corporation here, with fewer outlets than Costa Coffee.

A spokeswoman for Starbucks said: “In the UK we haven’t confirmed any news of closures. What we are doing at the moment is reviewing the portfolio of stores.”

Lord Mandelson, accompanied by the Health Secretary Alan Johnson, held talks with American drug companies about investing in the UK.

After hearing Starbucks’ statement, Lord Mandelson said: “I’m glad Mr Schultz has stepped back from his remarks. I made my point and I regard the matter as closed.”

Lord Mandelson said Britain and the US were in a difficult position, having made the first moves to combat the banking crisis but yet to see the first “signs of change”. He said there was “no value in trying to create frenzy”, and highlighted the need for a “steady nerve and cool judgment”.

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