As the Enron scandal continues to rock Washington, Patricia Hewitt has defended Labour's close relationship with business and announced a review of accountancy practices aimed at preventing a similar crisis in the UK.

The collapse of the US-based energy giant has triggered concerns in both financial and political circles.

Both Wall Street and London's City are worried about the ease with which the troubled company was able to hide its huge debts.

Politicians at Westminster are anxious over Enron's links to government following the row over the firm's donations to the Labour Party.

Telling a Mansion House dinner that she had been "shocked" by the Enron bankruptcy, Hewitt said the government wanted to strengthen the financial and audit framework for British companies and increase levels of transparency.

In a move that is certain to anger trade unions and many Labour backbenchers, Hewitt also pledged that business will remain "at the heart of government".

The Department of Trade and Industry provoked a storm of criticism last November when ministers announced a restructuring to bring private sector expertise in at the top of the department.

The heart of government

Hewitt said Labour had a good relationship with businesses and stressed that it was essential that it remained so. "Every family, every community, every part of our country depends upon the success of our businesses," she told an audience of senior business leaders.

The trade secretary attacked media criticism about the close relationship between Labour and big business - describing the reporting of government sleaze as "cynicism".

"We should all be worried about what happens to the health of our democracy if such cynicism takes hold," she said.

"What does it say to young people considering their future career when there is a continuous suggestion that business people who talk to politicians must be up to no good? How do repeated, unfounded allegations help to create the dynamic, entrepreneurial economy that we all want to see?"

She warned that without consultation with business, the government would make "bad policies and bad decisions".

"That is why business will stay at the heart of our government's plans for national renewal," she said.

Post-Enron accounting

The minister also announced two separate reviews of the role of non-executive directors and the UK's arrangements for financial reporting and auditing.

The government wants to strengthen the UK's framework on how companies operate and encourage greater transparency, said Hewitt.

"We need stronger, more independent and more active non-executives drawn from a wider pool of talent to play their part in raising productivity," she said.

Turning to the accounting issues raised by the collapse of Enron, she said: "We have all been shocked at the speed and scale of the dramatic collapse of Enron."

"We need to be sure that our systems of financial reporting and audit regulation are robust enough."

She said that both the DTI and the Treasury would cooperate with the Financial Services Authority and the Accountancy Foundation to co-ordinate Britain's response to the issues raised by Enron.

"While the accounting and regulatory requirements in the US are significantly different to the UK, it is crucial that we address issues which may question the integrity of markets. It is also vital that our response fits well with our overall company law reform process," Hewitt said.