Peter Mandelson had “singular talents” that meant his appointment as US ambassador had been seen as “worth the risks” despite warnings in the vetting process over his links with Jeffrey Epstein, the business secretary has said.

The dismissal of Mandelson as ambassador following new revelations about his close contact with Epstein after the financier was convicted of child sex offences has caused fury in the Labour party about the slowness of No 10’s response, as well as a major headache before the US president Donald Trump’s arrival this week for a state visit.

Peter Kyle denied Downing Street had known of the full exchange between Mandelson and Epstein that led to his sacking this week – but said he had transformed the UK-US relationship, which was why he had been given the vital role.

“Global politics had been turned upside down,” he told the BBC’s Sunday with Laura Kuenssberg programme. “The relationship between Britain and America was in a perilous state because of the threat of tariffs, what was happening economically, trying to repurpose and rethink the special relationship.

“Britain needed somebody with outstanding, singular talents, experience which was very hard to come by. And yes, a lot was known about Peter Mandelson’s relationship with Epstein. He had apologised for it. And these two things were weighed up.”

He said Mandelson had “navigated the most difficult period in the US-UK relationship since the second world war, and we have delivered for people in Britain time after time after time.”

He said the Cabinet Office had not provided the prime minister with any further information apart from what was already in the public domain.

“The Cabinet Office did an independent inquiry into the appointment, as they do in every public appointment of this nature, and the information was presented to the prime minister,” he told Sky News.

“The second process was obviously a political process where there are political conversations done in No 10 about all the other aspects of an appointment of this nature. Now both of these things turned up information that was already public and a decision was made that, based on Peter’s singular talents in this area, the risk of appointing knowing what was already public was worth the risk.

“Now of course we have seen the emails which were not published at the time, were not public and not even known about, and that has changed the situation.”

No 10 is facing considerable scrutiny over the new emails between Epstein and Mandelson – exchanged as Epstein was facing an 18-month sentence – where Mandelson told him to “fight for early release”.

Mandelson is believed to have been in touch with the Foreign Office permanent secretary, Oliver Robbins, earlier in the week after receiving a request to comment from Bloomberg, but No 10 said the full extent of the emails’ contents was not known until Wednesday afternoon after the Sun published a story.

The former UK ambassador to the US Sir Kim Darroch said the vetting procedure for ambassadors took “weeks and weeks” and included interviews with other sources.

“They ask people about you and they look into your background through sources you may not have nominated as people to act as your referees.

“So they do a thorough job … they take weeks and weeks, if not longer, over individuals – the process takes a fair amount of time, so you would expect them to know quite a lot and discover things that maybe weren’t advertised.”

He added: “On the other hand, you know, emails from closed or old email addresses that have been closed down – I’m not enough of a technical expert to know how you get to that kind of thing, so whether that would have been available to them I have no idea.”