Business warned the government it was “living on borrowed time” in trying to mitigate the impact of the credit crunch, as ministers on Wednesday unveiled plans to guarantee more than £21bn ($30bn) of lending to small and medium-sized companies.

Lord Mandelson, the business secretary, responded angrily to Tory criticisms of the proposals as being “too little, too late ... a small bandage on a massive wound”. A new £1.3bn loan guarantee scheme for small companies will take effect immediately, the government announced. But the first £1bn tranche of £10bn of guarantees for short-term loans, which lie at the heart of the new package, will not become operational until March 1.