Manufacturers must spend on innovation if they are to thrive in the global economy, the UK head of engineering-giant Bosch has warned.

Robert Meier, managing director of Robert Bosch, said firms must spend more on research and development to compete with low- cost economies in China and India. Bosch, which employs 4,600 people in Britain, invested £2 billion on R & D last year, a figure which represented 7.2 per cent of its turnover.

Speaking at a meeting of the German-British Chamber of Commerce in Birmingham, Mr Meier said: "Innovation is the key factor in our long-term strategy. We need to be in a leading position to be competitive in the future.

"Our R & D budget is far greater than the industrial average. The task of modern manufacturing is to create new products and systems.

"Innovation is one of the remaining fields where European companies can still be competitive. You cannot compete with low wages, but we can use our skills and expertise.

"But you also needed an excellent, trained workforce. We need to train the people so they have the skills to compete."

Europe generally could not compete with the low-cost economies in the Far East, but did have the edge in development work, said Mr Meier.

Bosch, which is the world's second largest producer of automotive technology, as well as domestic appliances and industrial technology, has factories across the world.

It has set up factories in Brazil, Peruz , Mexico, China and the United States of America to make its which range from hand drills to heating and braking systems.

Mr Meier said: "China is extremely challenging to every manufacturing company around the world. If you are looking for a low-cost site the UK is not attractive enough.

"India, China and Eastern Europe are much more attractive cost wise. But to us you need to have the know-how and experience which can go hand in hand with the low cost production.

"If you need expertise and know how, that can encourage companies to come to the UK, to use the abilities and skills of the people.

"This strategy shows we are responsible to the existing people in the company."

Mr Meier said the company, which employs 1,400 people at its factory in Worcester, was also targeting greater growth in the UK.

UK sales last year were £1.3 billion, making it the sixth biggest market for the company behind Germany, the US, France, Japan and Italy.

"We are planning to overtake Italy, but France is a little further away," he said.

"We have a plant in Cardiff, which has a skilled workforce, excellent infrastructure and good union relations.

"This factory makes four million alternators per year, 80 per cent for export.

"It is the main alternator plant for the Bosch group," he added.

Mr Meier said most people would be familiar with the brand from its range of domestic appliances. " Innovation is going on in the DIY sector as well. We are working on new technology and brands for our cordless range."