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Peter Mandelson declared that it was "all hands on deck" to steer Britain through the economic crisis as he made a sensational return to government this afternoon.

Despite ending a 15-year feud with Gordon Brown, the European Commissioner for Trade admitted that he was as surprised as everyone else at having been invited to leave Brussels and serve in Mr Brown's Cabinet as Business Secretary.

But he was proud to have been asked and was ready to get to work, he told reporters as he arrived at No 10. "Our economy, like every other, is facing a very hard challenge as a result of the global financial crisis. In a sense it’s all hands on deck," he said.

Mr Mandelson's return to Cabinet – he resigned under a cloud twice from Tony Blair's Government – had been kept a closely guarded secret and rocked Westminster when it leaked out this morning. Reminded of those previous stints today, he quipped: "You mean third time lucky?"

It also marks a stunning political reconciliation. Mr Mandelson and Mr Brown were once close friends and, with Mr Blair, created New Labour. But when Mr Mandelson sided with Mr Blair in the 1994 leadership election, their relationship nosedived and it is only in recent months that the two men have resumed regular contact.

Mr Mandelson said today: "Of course we have had our ups and downs but we have also known each other for over 20 years and originally we worked very well together and I am very proud to have been invited to serve in his Government - it’s not what I was seeking and it’s not what I was expecting but nonetheless it is a great opportunity and a great challenge."

His appointment allows Mr Brown to kill several birds with a single stone: it will help him bind talented Blairite ministers more closely to his Government; allow him to exploit the talents of a supreme political operator; and helps him beef up his Cabinet as the economic crisis hits.

It was the latter point that was stressed by Mr Brown today at a Downing Street press conference alongside Alistair Darling, the Chancellor.

Asked to explain his decision to bring Mr Mandelson back into the fold despite his previous resignations, he answered: "Serious people are needed for serious times."

He added: "If you have got someone with unrivalled experience in international business issues, someone who is respected by business for what he has done and who has built a reputation over these last few years as someone who can get things done, then if the British Government can benefit from that, it’s the right decision. You set aside all the issues of the past in the national interest and that is what we are doing today."

Since he resigned as an MP in 2004, Mr Mandelson will have to be made a peer and serve the Government from the House of Lords.

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