Lord Mandelson upped the stakes in a row with UK banks this morning by warning that they face a customer backlash if they do not pass on interest rate cuts to customers.

Britain's Business Secretary fired the latest salvo after an awkward 24 hours in the Gulf, which saw a senior HSBC banker travelling with the Prime Minister being attacked by No. 10 for saying that customers would not benefit fully from rate cuts.

David Hodgkinson, chief operating officer of HSBC, warned consumers they might not see any benefits if, as expected, the Bank of England slashes the cost of borrowing this week by as much as 1 per cent.

Speaking from Dubai, Lord Mandelson made his displeasure clear.

“I have to say when official rates are being cut it’s not unreasonable for the customers to expect to see some benefits.

“People want to feel the benefits of that action. And if it appears the banks are standing in the way of what the Government is doing, then I think many banking customers are going to be asking difficult questions of the banks.”

Lord Mandelson suggested British banks were embarrassing Gordon Brown on the world stage by failing to pass on interest rate cuts.

“I must say one of the things that has struck me going round the Gulf is the extent to which our own British PM is now being looked to as someone who will lead the rest of the world out of this mess.

“If we can’t even have a response in our own country to his moves, to his decisiveness, that will come as a surprise to many.”

The Business Secretary has been accompanying Mr Brown on the trip, opening doors for the 27 businessmen on a trade delegation around the Gulf.

The figures from BP, Shell, Rolls-Royce and other FTSE 100 companies have enjoyed easy access to Mr Brown on the British Airways charter plane, as well as dinners and meetings with senior government figures in the Gulf chaired by Lord Mandelson, whose return to Cabinet was the biggest shock of last month's reshuffle.

Earlier Mr Brown, who is flying back to the UK this evening in time for the results of the US election, said that the campaign, which has lasted nearly two years, had been historic.

"What I do know is that American leadership is going to be very important in the next critical time and I look forward to working with the next president, whoever he is," he told the Dubai-based al-Arabiya television.

"I think whatever the result of the American election... history has been made in this campaign - the women coming to the fore, a black candidate coming to the fore.”

Mr Brown has also hinted that progress was being made in the Middle East.

Asked if a settlement could be negotiated soon, he told al-Arabiya: "I think that's possible, I think people understand how it can happen.

"We know that very detailed negotiations have taken place over the last few months," Brown said on the last day of a Gulf tour, which has seen him hold talks with regional leaders including King Abdullah of Saudi Arabia.

"We know that the political situation at the moment has made it difficult for this to be brought to a conclusion but I think that given people understand not only the importance but how a solution would look, I think it's possible with the right circumstances to move quickly to a settlement."

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