A major campaign to boost the teaching of science and technology is needed if the UK is to keep its place in the global economy, a key report warns.
The report highlights the drop in the number of physics A-level students
Lord Sainsbury's Review of Science said there was a danger of a "race to the bottom", unless British firms moved into high value goods and services.
The UK had a good science record but needed to boost it quickly, he added.
Ministers responded by saying teachers who retrained as science specialists would be given an extra £5,000.
The government-commissioned report called for a major campaign to address the shortages of specialist science teachers.
It also wants to see more careers advice for those taking science, technology, engineering and mathematics (Stem) subjects in schools.
It said demand for graduates in these subjects was set to grow.
Although there was a reasonable stock of Stem graduates, potential problems lay ahead.
This was partly due to the 20-year decline in the number of pupils taking A-level physics, for example, it said.
Teachers should be given financial incentives and newly qualified teachers should be mentored.
Meanwhile the government should continue its drive to increase the number of young people studying biology, chemistry and physics separately.
Ministers should also consider giving all pupils the right to study a new further maths GCSE.
The report also highlighted a fall in public funding of science in recent years, adding that investment as a percentage of GDP is now smaller than it was a decade ago.
And it warned that emerging research nations, such as China, India, South Korea and Singapore were now mounting a strong challenge to the UK's leading position in research productivity.
But it said the number of spin-off firms from university research had increased, with clusters of high technology businesses growing up around institutions.
England's schools secretary Ed Balls said £8m would be invested to increase the number of specialist science teachers.
"We will also introduce accredited physics, chemistry and maths courses to retrain teachers to become specialists in these disciplines, beginning this month.
"Every teacher who completes the course will receive a financial incentive of £5,000.
"In addition, new bursaries of £200 will be given to schools most in need to encourage them to release teachers for professional development at our science learning centres."
The money will also be used to double the number of school science clubs.
There will be a £1bn campaign to boost business innovation, technological development and create a new science strategy, spearheaded by the Department for Innovation, Universities and Skills.
Shadow secretary of state for innovation, universities and skills, David Willetts, said: "Lord Sainsbury's report calls for more students to study the three sciences at GCSE.
"We believe every school student should have the right to study them."
Acting director of the Campaign for Science and Engineering, Dr Hilary Leevers, said it was not surprising that Lord Sainsbury recognised the severity of the shortages of specialist secondary science teachers.
"He joins many calls upon the government to provide additional funding for current teachers to retrain into shortage subjects."
University and College Union general secretary Sally Hunt said it was important for colleges, as well as schools, to have the resources to implement the plans and for universities to be equipped to develop a new generation of Stem students.
The university leaders' umbrella body Universities UK welcomed the recognition of the importance cutting-edge research and skilled graduates played in the knowledge economy.
But it called for more government backing of links between universities and companies doing research and development.