Speaking to the Confederation of British Industry's annual conference, the Trade Secretary said knowledge had become the only source of competitive advantage.

"We are in an age of discovery and creativity, which opens up new possibilities for advancement and well being. That is the opportunity we must grasp," Mr Mandelson said.

But the Trade Secretary said the government had no intention of hindering business by reverting to the interventionist policies of the past.

"To be modern now as we face the Millennium is to make markets work better."

He said that was why the government had introduced the Competition Bill - because competition drives innovation, customer service, competitiveness. It underpins British business success."

And he said there would be no special favours for the unions, with a "scrupulously fair" approach to trade union recognition.

He said that the creation of an enterprise culture meant the end of class divisions in industry.

"This government is determined that 'us-and-them' must never return," he said.

The government will provide the unions with enforceable recognition rights only where this is supported by a clear majority.

Strong backing for Europe

Mr Mandelson made it clear that the government was stepping up its commitment to joining the euro, speaking of joining "when" rather than "if" the UK met the economic conditions for joining.

He said the UK must be a committed partner in Europe.

Europe was on the verge of creating the largest integrated market in the world, with the potential to match the dynamism of the USA.

He said it would be economic lunancy to marginalise ourselves on the sidelines of Europe as the Conservatives wanted.

Businessmen must be heroes

Mr Mandelson said the UK needed to create an environment where indigenous enterprise could thrive.

As a country "we should have no guilt-ridden hang ups about people making themselves rich as a result of genuine entrepreneurial success," he said.

Regulatory frameworks needed to be eased to help small companies grow.

"We want a society that celebrates its business heroes as much as its pop stars and footballers", he told the CBI audience.

In particular, he said he wanted to tackle the stigma of failure, which meant that corporate rescue procedures and the law of bankruptcy needed to be changed.

The government needed to carry out a review of corporate rescue procedures and look at how the law could be changed to reduce the stigma of financial failure, he said.