Business Secretary Peter Mandelson has officially confirmed to his senior colleagues that he completely supports plans for a state-run investment bank, which would be utilizing public funds and private capital to back and help small-sized businesses and large-scale infrastructure projects across the UK.

The new bank would follow the same model as the Bank in Germany, which offers funds for banks to loan to small businesses, in addition to capital for the country's major projects. Normally operating banks all across the continent turn to KfW as a source of inexpensive finance, which is made available to it as it has a guarantee from the German Government.

Over the recent months, Lord Mandelson has met with KfW Senior Executives twice, once in London and once in Berlin, in order to discuss how such a bank could work in UK.

Plans for the same are now being analyzed and discussed by the Treasury team, with the view to make some form an announcement about the same in the Budget.

Lord Mandelson is reportedly very excited about the project.