LORD Mandelson launched a furious attack on "remote, ivory-tower" universities – warning them they must start serving the economy or face decline.

The Business Secretary criticised Vice-Chancellors for not "investing in the courses and supplying the skilled graduates" badly needed for emerging technologies.

Speaking to the Daily Post at Westminster, Lord Mandelson revealed he had given university chiefs a dressing-down in the latest meeting of the Government's recession-busting “Regional Economic Council” (REC).

And he expressed no sympathy for lecturers who might lose their jobs in looming cuts, adding: "If that means changes in employment, so be it."

The extraordinary attack will deepen tensions with Liverpool's universities, which condemned last month's announcement that university budgets will be slashed by £135m next year.

Professor Sir Howard Newby, the University of Liverpool Vice-Chancellor, warned that slashing funding per student "will create real and long-term difficulties".

The city's Vice-Chancellors have warned they will be forced to recruit more overseas students and are nervous about government calls for "fast-track" two-year degrees.

But Lord Mandelson insisted their task was to "deliver" skilled workers – and research – for fast-growing opportunities in biosciences, pharmaceuticals, low-carbon jobs and the civil nuclear industry.

And he said: "Universities are not ivory-towers, they are not remote islands in the regions where they are located.

"Universities are still not investing in the courses and supplying skilled graduates to do the jobs that these new business activities are demanding.