Gordon Brown used this week's Budget to tackle the challenge posed by other emerging market economies such as China, by commissioning a review into how Britain's creative industries can help its struggling manufacturers. The chancellor asked George Cox, chairman of the Design Council, to examine how the UK's expertise in advertising, software, the media and universities can be exploited to boost industrial competitiveness. Mr Cox, former head of the Institute of Directors, will report in time for autumn's pre-Budget report.

The review is to be accompanied by a study into the economic potential of creativity and £10m or more of extra funding for the Arts Council, for training.

Mr Brown's emphasis on manufacturing reflects concern that, while the outlook for the sector has begun to look more positive, its share of total economic output has continued to shrink. The number of manufacturing jobs is falling steadily and Mr Brown used a recent tour of China to promote a rescue deal for MG Rover with a Shanghai carmaker.

The chancellor believes that companies will have to compete on quality and added value, rather than price alone, if they are to meet increased challenges from lower-cost Asian producers. He has been persuaded by Design Council research showing that FTSE 100 companies that have invested heavily in design have tended to outperform the index.

Mr Brown is concerned that too few businesses are exploiting the expertise of creative industries. His plans include a new design centre in Newcastle.

"The chancellor recognises that, in the years ahead, manufacturers must move towards high value-added and creative products to unlock new markets," a Treasury official said.