LONDON, Oct 3, 2008 (AFP) - EU trade commissioner Peter Mandelson made a surprise return to the British government on Friday in what he admitted was an unexpected comeback for a former enemy of Prime Minister Gordon Brown.

Mandelson, who has twice been forced to resign from ministerial posts in the past, acknowledged outside Brown's Downing Street residence that his new post 'was certainly not what I was expecting' but said he was proud to be a minister for the third time.

The appointment of Mandelson to the post of business minister was the biggest surprise in Brown's cabinet reshuffle.

Brown and Mandelson fell out in 1994 when the latter backed Tony Blair for the post of Labour leader, creating divisions within the centre-left party that remain to this day.

On Friday, however, Mandelson praised Brown's leadership during the economic crisis. He said that while the pair had had their 'ups and downs... we've already known each other for over 20 years, and originally we worked very well together.'

Mandelson, 54, said his role would be 'to help protect our economy.'

Announcing the reshuffle, Brown said Mandelson was 'brilliant' and that 'serious people are needed for serious times.'

Mandelson will replace John Hutton, who will move to replace Defence Secretary Des Browne, overseeing Britain's troops in Iraq and Afghanistan.

As expected, Brown left the key positions of Finance Minister Alistair Darling and Foreign Minister David Miliband unchanged, but gave other party veterans new duties.

Geoff Hoon, defence chief when Britain joined the 2003 US-led invasion of Iraq, moves from chief whip to be transport minister and former foreign secretary Margaret Beckett becomes housing minister.

There was also a new role for a rising star of the government, David Miliband's brother Ed, who will head a new energy and climate change ministry.

'What Gordon Brown has done today is he has dramatically shifted the focus on to the things that families and business in this country are worried about, and that is the economy,' said Liam Byrne, promoted from immigration minister to minister for the Cabinet Office, speaking to Channel 4 television.

The reshuffle is the latest stage in Brown's fightback after he fended off an attempt to trigger a leadership election from disgruntled lawmakers within his own party.

The main opposition Conservatives have held a strong lead in opinion polls, but Labour have started to cut the gap as the electorate warm to Brown's portrayal of himself as the best man for tumultuous economic times.

Mandelson is a divisive figure who masterminded Labour's image change to 'New Labour' ahead of their landslide victory at the 1997 general election.

He forged a close relationship with Blair but was forced to resign from two cabinet jobs amid scandals, only to resurrect his career each time.

He served as trade minister under Blair, but was forced to step down over a home loan scandal, and then won plaudits in the sensitive post of Northern Ireland secretary.

But his stint there was ended by a row about British passports provided for the ultra-rich Indian Hinduja brothers, and Blair sent him to Brussels in 2004 as Britain's commissioner in the European Commission, the EU's executive arm.

He oversaw the marathon negotiations over a new world trade agreement, representing the 27-nation EU at World Trade Organisation talks, but the talks collapsed this year, to Mandelson's immense frustration.