Lord Peter Mandelson has said it is a “great honour to serve the country” as the Prime Minister confirmed he had appointed him the next British ambassador to the US.

Labour grandee Lord Mandelson, who served in the cabinets of Sir Tony Blair and Gordon Brown, becomes the UK’s top diplomat in Washington DC as US President-elect Donald Trump is set to return to the White House.

“It is a great honour to serve the country in this way,” Lord Mandelson said.

He added: “We face challenges in Britain but also big opportunities and it will be a privilege to work with the Government to land those opportunities, both for our economy and our nation’s security, and to advance our historic alliance with the United States.”

Lord Mandelson will take up the role in early 2025.

Sir Keir Starmer said that he was “delighted” to appoint Lord Mandelson, and he will bring “unrivalled experience to the role”.

In a statement, the Prime Minister said that “the United States is one of our most important allies and as we move into a new chapter in our friendship, Peter will bring unrivalled experience to the role and take our partnership from strength to strength”.

He also thanked outgoing ambassador Dame Karen Pierce for her “invaluable service” and “steadfast support” she has given him personally since his election in July.

Sir Keir added: “She made history as the first woman to serve as UK Ambassador to the US and she has been an outstanding representative of our country abroad. I wish her all the very best in future.”

The political appointment comes as Mr Trump will return to the White House in January.

Lord Mandelson’s trade experience is seen as a strength amid concerns over what the second Trump presidency could mean for the UK.

Mr Trump has pledged to introduce wide-ranging tariffs on the first day of his new administration, which starts on January 20, with experts predicting damaging consequences for Britain’s goods trade with the US.

However, the Labour grandee’s past remarks about Mr Trump – who he once described as “little short of a white nationalist and racist” – may yet plague attempts to foster close US-UK relations.

Chris LaCivita, a senior adviser to Mr Trump’s 2024 election campaign, has already hit back at the Labour peer after his words emerged, describing Lord Mandelson as an “absolute moron”.

A source previously described Lord Mandelson as having “unrivalled political and policy experience, particularly on the crucial issue of trade”, and on Friday a Cabinet minister suggested he would be a “really good fit” for the position.

Transport Secretary Heidi Alexander described him as “an individual of very significant international standing”. She told Sky News: “We need someone as the next ambassador to the US who is going to be able to promote our economic and security interests with one of our closest allies, and so I think he is a really good fit for the job.”

Lord Mandelson was one of the architects of New Labour, helping to restore the party to power in the 1990s.

He served as trade secretary and Northern Ireland secretary under Sir Tony but stood down as an MP in 2004 to become a European Commissioner.

He returned to government in 2008 when Mr Brown awarded him a peerage and appointed him business secretary.

More recently, Lord Mandelson stood to be the next chancellor of Oxford University but lost out to former Conservative leader Lord William Hague.