UK needs Australia's help in charting Brexit trade chaos says Peter Mandelson

An influential figure from the Tony Blair era says Australia has a major role to play in helping Britain rebuild fractured trade relationships after last year's surprise vote to leave the European Union.

Former Labour cabinet secretary Peter Mandelson says Australia can help Britain keep its place on the world stage as the fallout of Brexit continues to create uncertainty about current and potential trade deals.

Peter Mandelson speaks with the ABC'S Peter Ryan

Mr Mandelson has been in Sydney and Melbourne to help lay the groundwork for a free trade deal between Australia and the UK which remains on hold until the terms of Britain's exit from the EU are finalised.

"What I'm finding is quite of lot of bemusement about what Britain has done. We turned our backs on Australia in the 1970s order to join Europe. Now we're divorcing Europe all these decades later," Mr Mandelson told the ABC.

"I think many Australian business people just wonder why on earth we should throw all the sticks and all the rules up in the air without any idea where they're going to land."

Mr Mandelson, a former Northern Ireland secretary and EU trade commissioner, says with Prime Minister Theresa May refusing to rule out a "hard Brexit" Australia can help Britain rework it’s image of being protectionist and isolationist.

"One thing Australia can do for Britain is to reintroduce us to the world of trade policy and trade negotiation from which we've been absent for nearly 50 years as we've relied on the size and the heft of the EU," Mr Mandelson said.

"We are part of each other's DNA, we do have a special friendship. But with the extraordinary turn that Britain is now taking in leaving Europe, there is an opportunity to forge a further relationship built on trade realities."

Mr Mandelson was a stalwart of the "remain" campaign and has made his first visit to Australia to offer advice to businesses in his role as chairman of the consultancy firm Global Counsel.

He acknowleges Australia's key trade relationship are now with the United States and China but says Australia was gifted an opportunity in the 1970s when Britain softened traditional links in favour of Europe.

"The biggest favour that Britain ever did for Australia was saying in the 1970s that the protectionist, rather isolationist exclusive relationship it had with Britain needed to end," Mr Mandelson said.

"We forced Australia through the decision of turning our backs and to going into Europe,  to create an open economy and look to its own region.

"Just look at the fortune and prosperity that Australia has been able to achieve. For Britain we've got to make the same judgement that there's no future in retreating into ourselves."

However, Mr Mandelson concedes it might be in Australia's best interests to prioritise an agreement with the EU ahead of one with Britain.

A potential flashpoint from Brexit is the trade relationship between Northern Ireland and the Republic of Ireland which was created after decades of sectarian violence.

Mr Mandelson says after the Good Friday agreement of 1998 saw Northern Ireland to keep its links with the UK but allowed it to participate in  an "all Ireland" economy without hard borders.

"What Brexit does is to just reinsert a border down the middle because when we leave the EU we won't be in a single market. That is going to reintroduce not just trade frictions but political tensions which could very well undermine all that we've achieved in Northern Ireland," Mr Mandelson said.

"I think over time people are going to have to choose between the political settlement they have and the economic future and prospects that they want."

Mr Mandelson slammed Prime Minister David Cameron's decision to hold a Brexit referendum as "not the finest hour for Britain's political elite."

"Britain's political elite was given a good kicking in the reference and in a sense who can be surprised? The British people emerged from the global financial crisis bearing a lot of pain for other people's policy errors."

As the uncertainty about Brexit continues, Mr Mandelson says calling the referendum was "an utterly irresponsible thing to do."