Cable is worried about the eurozone

(Susannah Ireland)

Britain could be hit by a second financial crisis or face years of stagnation similar to that suffered by Japan, the Business Secretary, Vince Cable, warned last night as he painted a grim picture of the nation's economic health.

Mr Cable told The Independent fringe meeting that the ingredients were still in place for an economic "perfect storm". He admitted the gloomiest scenario was that Britain could plunge into a new financial crisis prompted by the collapse of the Greek and other eurozone economies. He also warned Britain could suffer years of weak growth.

Speaking to a packed hall, he said: "It is very serious. We have several different problems converging. Britain's consumer boom has come to an end. On top of that you had a financial system that got out of control with a lot of greed and stupidity. Then you've got a long-term shift in the world economy to India and China."

Mr Cable defended the Government's austerity package to cut the deficit, but confessed to suffering sleepless nights over the impact of his decisions. "I don't have any doubt we have to do this," he said. "But I stay up all night worrying about the decisions I have to make. We are on very dangerous terrain."

Mr Cable also revealed it had been his decision to refer News Corp's bid for BSkyB to Ofcom last year that ensured it had not already gone through by the time the Milly Dowler phone-hacking revelations became public.

Mr Cable admitted he felt "uncomfortable" about going into Government with the Conservatives but insisted he had a good working relationship with the Tories in his department.