The business secretary, Peter Kyle, has warned UK pension funds to “get off their high horses” and invest in Britain or be forced to do so by law.

Expressing frustration at the level of investment in British companies after years of government initiatives, Kyle said the UK’s biggest asset managers “should feel a patriotic duty in making Britain a success”.

“I don’t think mandation is ideal in any circumstances. But I’ll use it if I have to, because I’m in a rush.”

Speaking to the Guardian on the sidelines of an event at Lloyds Banking Group’s headquarters in London, he said he was “fed up” with being asked by the City to tweak regulations to boost investment in the UK economy, only to see a lack of investment follow government reforms.

“Don’t make us come back, because we’ve got lots of other things we want to do … It feels like they are still sitting on the fence, so will more powers be needed? I hope not,” he said.

“They are representing British savers. And so they should feel a patriotic duty in making Britain a success. And not just sitting aside from the economy, in a walled-off garden. They are out there with the rest of us. They need to get off their high horses.”

Successive governments have pushed to raise the level of UK pension fund investment in the British economy, including the chancellor, Rachel Reeves, and her Conservative predecessor, Jeremy Hunt.

Reeves last year agreed a new “Mansion House accord” with 17 of the UK’s largest pensions funds to release voluntarily up to £50bn of investments, with at least half earmarked for British assets, including clean energy projects and startup firms.

Earlier this year Reeves won a battle in the Lords to secure powers to mandate investment in UK assets. However, the bill faced fierce City lobbying and Tory opposition and was watered down, leaving ministers with a back-stop power that cannot be used before 2028. The powers, which also include a “saver’s interest test”, will disappear if not used by 2032, and by 2035 if they are.

Most pension providers already allocate funds to UK assets, although ministers have expressed frustration that many big overseas investors – including Canadian and Australian pensions schemes – often invest substantial amounts in UK infrastructure projects and private assets relative to domestic money managers.

Andy Haldane, the president of the British Chambers of Commerce, who has advised Andy Burnham on economic policy, recently suggested that pension tax relief worth more than £50bn should be offered only to savers who are prepared to invest in Britain.

Speaking last month, the former Bank of England chief economist said radical measures were needed to provide startup companies with the capital they needed to grow.

Kyle’s comments come as Labour attempts to smooth over City concerns about a transition in power from Keir Starmer to Burnham, who is expected to become prime minister by 20 July.

The business secretary pledged that the government’s industrial strategy would continue to be prioritised under Burnham, as he made a pitch to keep his job to ensure stability of the transition.

“I want to stay, I’ll just stay where I am,” he said. “I mean, if I was given one wish, I’ve had this job for 10 months. You’ve seen what I’ve got off the ground.”

In a speech to City figures to mark the first year of the government’s industrial strategy, Kyle said Britain needed “Manchesterism” – Burnham’s plan for more devolution and state involvement in running services – to boost the economy outside London and the south-east.

He said a change in leader would not unsettle the industrial strategy. Asked whether he was concerned that Labour could rattle business confidence, he said: “I’m concerned that it’s a potential outcome. [But] I don’t think it’s the one that we are going to deliver.”