CHANCELLOR Gordon Brown has urged British companies and businessmen to adapt to the challenge from India and China.

Mr Brown made his comments when addressing an international conference in London on advancing enterprise, and warned that globalisation would see huge numbers of manufacturing jobs leaving the West.

He said: "By 2015, up to five million American and European jobs could have moved offshore - outsourced to countries like India and China as they strive to become the world's second and third largest economies."

Speaking to an audience including prominent businessmen, Mr Brown accepted that globalisation is putting pressure on businesses to move jobs.

He said: "There is hardly a product or, increasingly, a service you produce that is not subject to global competition.

"And at every point, you have to look not just where round the world you source your materials and your labour and skills, but also where your competitors source their labour and skills."

Mr Brown said the key to Britain's future prosperity lay in replacing low-technology, low value production with high-tech, value-added products and services.

He said the Government would seek to foster a culture in which that transformation could happen.

Mr Brown also undertook to make a decade-long plan for science funding a central feature of this year's Government spending review, which will set out departmental spending plans for the next three years.

He also urged the European Union to resist the temptation to ignore the impact of globalisation and continue to introduce inflexible working practices.

The Chancellor said: "The best contribution we pro-Europeans can make to the cause of Europe is by ensuring that in Europe we face up to, rather than duck, the difficult decisions about economic reform - resisting the kind of inflexibility being added into directives like the Working Time directive, the Agency Workers directive, the Investment Services directive and the Transparency directive, as well as insisting on tax competition not tax harmonisation."

He also announced a series of initiatives to promote an enterprise culture, including:

* The first national Enterprise Week in November this year;

* The Queen and other Royal Family members visiting outstanding examples of enterprise on July 14;

* A National Council for Graduate Entrepreneurship;

* An annual British competition for the UK town or city of enterprise.