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Peter Mandelson has become embroiled in an angry exchange with Starbucks chairman Howard Schultz over the state of the British economy.

In an interview with CNBC television channel, Mr Shultz had singled out the UK for concern.

"The place that concerns us the most is western Europe, and specifically the UK," he said.

"The UK is in a spiral.

"Unemployment, the sub-prime mortgage crisis, particularly in the UK, and I think consumer confidence, particularly in the UK, is very, very poor."

Lord Mandelson heard the comments while waiting to appear on the same programme, and responded by saying: "The UK is not spiralling, although I've noticed Starbucks is in a great deal of trouble – but that might be because of their over-expansion given the state of the market.

"So please don't project Starbucks on to the UK economy as a whole."

But his later comments, to journalists at a diplomatic cocktail reception in New York, were somewhat less cautious.

"Why should I have this guy running down the country?" he allegedly said.

"Who the f**k is he? How the hell are they [Starbucks] doing?"

Starbucks profits are down 69 per cent for the last quarter of last year, standing at $64.3 million.

It has announced plans to shut 300 shops in addition to the 600 closed last year.