The BBC's Denise Mahoney reports: "If they're to survive companies must harness the power of the web"

Speaking in Cambridge, the heart of the UK's IT industry, Mr Blair warned businesses: "If you don't see the Internet as an opportunity, it will be a threat.

"In two or three years' time, the Internet will be as commonplace in the office as the telephone."

Web czar appointed

The prime minister's speech coincides with the appointment of an "Internet czar".

Nine million Britons will be on the Internet by the end of the year

The UK's first "e-envoy" is Alex Allan, a former High Commissioner to Australia who also spent five years as Mr Blair's principal private secretary.

He will work closely with "e-minister" Patricia Hewitt, who previously worked at the Department of Trade and Industry with the information technology industry.

The government will take the lead in moving forward into the new information era, Mr Blair said by, "promoting competition, minimising regulations and equipping people with the skills they need".

The government will offer 80% discounts on IT training courses for adults, he revealed.

The prime minister promised that from next year more government services will be available online, including tax self-assessment forms.

Blair learns to surf

Listen to Tony Blair's full speech on e-commerce

While encouraging British business to take the Internet more seriously, Mr Blair also admitted that he is no expert on computers.

To help him catch up Mr Blair said he will be taking a half-day computer course to teach him to use the Internet.

"Like many people of my generation in positions of leadership, I rarely use a computer and when I do I usually need help.

"But I know it's not good enough and if I recommend lifelong learning to others, then I know I should go back to school myself," he said.

UK online transactions will be worth almost £3bn this year

Earlier, the prime minister used the Internet to send flowers to his wife Cherie.

The begonias will be delivered to Downing Street later on Monday.

Mr Blair told workers at the software company Zeus: "You do realise if I am going to send my wife flowers she is going to think I have done something really bad."

Lagging behind Finland

Mr Blair's visit to Cambridge coincides with a government report warning that Britain is in danger of lagging behind in e-commerce.

BBC Internet Correspondent Chris Nuttall interviews Alex Allan

The prime minister welcomed the study, from the Cabinet Office's Performance and Innovation Unit (PIU).

It suggests that the UK is already being outstripped by not only major economies like the US and Canada, but also some small ones like Norway and Finland.

Mr Blair said: "We need to act now. Too often Britain has made a good start, only to see others exploit the benefits of new technology."

UK e-commerce transactions are expected to be worth £2.8bn this year, and experts say that figure could grow tenfold by 2002.

But the report warns that unless something is done quickly, British industry will be overtaken by international competitors using the Internet to sell direct.