Companies need help to ease them through recession, Lord Bhattacharyya, head of Warwick Manufacturing Group, has warned.

And it was “vital” government responded, he said. Speaking in a debate on the Queen’s Speech in the House of Lords, his call comes ahead of a bail-out of the hard-hit car industry expected to be announced this week.

Lord Bhattacharyya has said the sector needs £1billion in short term aid.

He told peers: “In the last 20 years we built efficient, flexible and innovative manufacturing businesses in sectors as varied as aerospace, pharmaceutical and automotive. These companies have fixed their roofs, so to speak. Now it is not the roof, but the foundation of future growth that requires investment. Businesses do not want life support, but they do need our help to make Britain fit for the future. It is vital we support them.”

Manufacturing faced severe challenges as a result of the financial crisis, and there was a need for “some degree of industrial activism” by the government, he said. And, in an apparent swipe at banking, he went on: “We must act swiftly so the cost of failed speculation is not a loss of vital innovation.

“Crucially, we need to invest in technology and research.

“A co-ordinated approach to research has done extremely well in the life science and biotech sectors, where public investment and charitable funding of over £2billion a year has worked wonders for our knowledge base and our pharmaceutical industry, which now employs seventy thousand people in the UK and has a turnover of over £50billion. This should be applauded.

“Yet we know engineering and technology research funding is only around £500million a year, so it is clear, that as a much larger sector of the economy, it needs the same approach in funding and skills.”

This would require co-ordination between bodies such as the Engineering and Physical Sciences Research Council, the Technology Strategy Board and the Regional Development Agencies.

“These agencies need to have a symbiotic relationship with industry to ensure a critical mass of innovation,” said Lord Bhattacharyya.

“Only businesses which innovate today will have new products and more efficient processes to offer when consumer confidence returns – and it is good products and good margins that decide the fate of companies.

“Britain is a relatively small country. In a global environment we must export, which means ensuring we always have a world leading product base.

“The government has set out the areas in which we as a nation need to innovate. These include preparing for an aging society, security from defence to energy and the development of low carbon technology to minimise environmental change.

“We all know ‘picking winners’ did not give expected returns in the past, but we need to recognise that a total abdication of leadership would also be a failure.

“By 2011 we will be spending almost £4billion a year on scientific research. We must focus these resources on what President-elect Obama called ‘building the ecology of innovation’.

“Today, funding still has an overwhelming bias to ‘pure science’, a phrase which suggests a false divide between research and application.

“To integrate innovation into our economy we need to encourage research in partnership with business. We must develop applied research plans for sectors such as healthcare, energy, engineering and computer security – and we should reach out to businesses, not always expect them to take the lead in applied research in difficult economic times.

“The tradition of scientific research has been long term and blue sky. But the recent calls from the biotech sector for immediate financial support show that the supposed conflict between short term support and long term investment in R&D is a fallacy. One needs both, even more so in times of crisis.”