UK FIRMS must spend more on innovation and stop moving jobs abroad, Microsoft chairman Bill Gates said.

Addressing a conference in London on advancing enterprise, Mr Gates warned the challenges of globalisation meant Western companies had to focus on developing new products.

Firms would be able to take advantage of copyright laws to guarantee long-term revenue streams and lay the foundations for future profits, he said.

The West should not fear emerging economies that are competing for jobs in highly skilled sectors such as IT, he added.

Mr Gates, who is to receive an honorary knighthood from the Queen for his contribution to enterprise, said: "This is not war. To believe that we should tax them in some exceptional way would be a knee-jerk reaction."