Cameron takes commercial approach to foreign policy

Businessmen could be recruited as British ambassadors abroad under a shake-up of the Foreign Office to put diplomats in the front line of winning orders for UK firms and inward investment in this country.

David Cameron has ordered a revamp of the Foreign Office as Labour's much-mocked "ethical" foreign policy gives way to a commercial approach.

The change will be symbolised today when Simon Fraser, a former close adviser to Lord Mandelson and currently the top civil servant at the Department for Business, is appointed Permanent Secretary at the Foreign Office and head of the diplomatic service. Traditionally, the coveted post goes to a career diplomat.

Mr Fraser is a trade expert and was chief of staff to Lord Mandelson when he was Europe's trade commissioner, before the peer brought him back to Britain to head the business department. His appointment may not be met with joy by the French government, with whom he clashed in Brussels.

He succeeds Sir Peter Ricketts, who has become Mr Cameron's national security adviser. The Foreign Office will also appoint a commercial director for the first time as it gears up to divert its energies to helping British firms. Businessmen will be encouraged to apply for ambassadors' posts in a move that will put some Foreign Office noses out of joint.

There will also be concerns that the Foreign Office is being asked to take on a new role when it will have to cut its budget by 25 per cent over the next four years, under Treasury plans to reduce the £155bn deficit. Ministers insist all departments must do more for less.

Speaking to journalists as he travelled by train from Washington to New York yesterday, Mr Cameron said: "I want to re-fashion British foreign policy to make it more focused on the commercial aspect. We need to demonstrate that Britain is open for business.

"As we move out of recession and into recovery, we need to make sure we pay our way in the world... I want us to be much more effective at winning orders for Britain."

The Prime Minister said that in every meeting with a foreign counterpart, British ministers and officials must be armed with a clear list of commercial priorities, so they can win contracts and oil the wheels for bilateral and multilateral trade deals.

Earlier, the Prime Minister laid a wreath at the Arlington War Memorial in Washington. But not everything went according to plan, as he described Britain as the "junior partner" of the US in fighting Nazi Germany in 1940, even though America did not join the Second World War until a year later. Downing Street insisted his comments were not intended to belittle the Britain's troops at a time when the UK and its empire stood alone against the Nazis. "He was referring to the current relationship between the UK and US," said a spokeswoman.

Mr Cameron also had to fend off criticism for sending "mixed messages" over the exit strategy for Afghanistan, after he raised the prospect of British troops starting to withdraw as early as next year. That put him in line with President Barack Obama, who has said that US forces will start to come home from July next year.

Nick Clegg, standing in for Mr Cameron at Prime Minister's Questions, said: "No timetable can be chiselled in stone but we are absolutely determined, given how long we have been in Afghanistan ... that we must be out of a combat role by 2015."

Like Mr Obama, Mr Cameron wants to reassure a domestic audience that the operation in Afghanistan is not open-ended. But service chiefs are anxious about setting apparent timetables for an exit strategy. The former head of the Army, General Sir Mike Jackson, said he was "wary" about setting dates, and a plan to transfer power to Afghan security forces "does not equal reality".

The Prime Minister insisted there was no contradiction between saying the withdrawal would be "conditions-based" and that it would be completed by 2015, as he said last month. "We have said that in 2015 there are not going to be ... large numbers of British troops in Afghanistan."

Speaking in New York last night to a dinner hosted by the city's Mayor, Michael Bloomberg, and attended by businessmen including the media magnate Rupert Murdoch, the Prime Minister said his three economic priorities were a lower deficit, freer trade and responsible business.

The dinner was the second meal Mr Cameron shared with Mr Bloomberg after the pair ate hot dogs in the street outside Penn Station in Manhattan. Perhaps in the spirit of austerity, Mr Cameron took his $2 dish, paid for by the Mayor, without onions or mustard.

Admitting his differences with President Barack Obama on the speed of deficit reduction, Mr Cameron said the dollar was a reserve currency "so he doesn't have to hurry in the way that I do". He added: "If we don't sort out our public finances, we can't be a dependable trading partner. Our companies won't be serious prospects for investment; our inflation and interest rates [will be] high; the debt burden on our children greater still. We have to make cuts. And we have to make them now."

Yesterday Mr Cameron also held a separate discussion with a group of leading Wall Street bankers about financial regulation, at which he pressed London's claims as a financial hub.

* Two British soldiers were shot dead in Afghanistan yesterday while trying to rescue a comrade, the Ministry of Defence said. The soldiers, one from The Royal Dragoon Guards and the other from 1st Battalion Scots Guards, were killed by small arms fire. Their families have been told.