Lord West of Spithead, parliamentary under-secretary for security and counter-terrorism, told the Observer that the UK was under daily cyber attack from overseas, claiming that there had been “300 significant attacks” on the government’s core computer networks in the last year.

West claimed that many of the attacks were coming from state sponsored agencies and, although he refused to reveal who they were, he claimed that the UK would be prepared to go on the offensive in order to stay ahead of the hackers.

“If I went and bombed a power station in France, that would be an act of war,” he said. “If I went on to the net and took out a power station, is that an act of war? One could argue that it was.

“If some state sponsor keeps trying to get into your systems, probably for industrial espionage, are you going to go back into their system and bugger it up? We’re all capable of doing these things. At the moment we wouldn’t do that, but maybe this is where we need to have discussions.

“I’m very worried they [terrorists] may start becoming cuter and try to use our connectivity to have a go at our critical infrastructure, things [that control] our services, our food [distribution] and water supply,” he said. Terrorists were currently “not brilliant” at attempting this sort of attack on infrastructure, he added, but they would learn fast and “we’ve got to be ahead of them”.

His comments come after Google accused two high profile Chinese computing schools as the perpetrators behind an attack on its services earlier this year, whilst British security agency MI5 has warned that tackling espionage conducted by Chinese and Russian agents is taking up an increasing amount of its time.

Robert Mueller, director of the FBI, has also expressed concerns over attacks from overseas on American systems.

A recent security attack on Google and Google services, which it is claimed originated from China, has prompted the search engine giant to consider ending its activities in the country and now law firm Gipson Hoffman & Pancione, working on behalf of Solid Oak Software, has also reported being targeted.

The company is currently filing a lawsuit against the Chinese government after claiming that source code used in one of its software programmes has been stolen and be used in the government mandated Green Dam software that was included with all PCs sold in mainland China between July and August 2009. The software is used on all PCs in schools, internet cafes and public locations but home and business users are now no longer obliged to use the software. The lawsuit is worth around $2.2bn.

The company reported that employees were receiving emails, all of which carried Trojans, which were made to appear as if they were sent by other members of the firm.

The attack follows Google’s announcement on Tuesday that hackers it believed were acting on behalf of China attacked the defences of 34 large companies, including Google and Adobe. Google has since pledged to stop honouring the Chinese government’s demands to filter search results on Google.cn or pull out of China altogether, a market thought to be worth around $1bn.

Chinese government officials have issued the warning over the Worm_Piloyd.B worm after the virus was discovered circulating on Chinese networks.

The Tianjin-based National Computer Virus Emergency Response Centre reported that the virus infects .exe, .html and .asp files and is programmed to block users from restoring any files that are infected.

The virus also forces an infected system to download other viruses from websites and it is claimed that the worm will also be used to make an infected PC part of a wider botnet.

The warning is unusual in that it has not been issued by antivirus experts in the US or Europe but instead, from a officials in a country which has become renowned for being a breeding ground for malicious software. Research released in 2008 claimed that 44.8% of all malware-infected websites were being hosted in China.

The problem, many believe, is exasperated by the Chinese government’s secretive policy on computer usage, with strict state controls on computer usage and internet access. For example, a compulsory government firewall software program must be installed on all PCs being used in the country.

Earlier this year, a report by the US-China Economic and Security Review Commission suggested that Chinese government agencies were attempting to monitor American computer systems.

Computer users are urged to ensure that their antivirus software is kept up-to-date to minimise the risk of being affected by the worm.

The report, which was commissioned by the US-China Economic and Security Review Commission, states that the country poses the biggest cyber security risk to the US, claiming “China is likely using its maturing computer network exploitation capability to support intelligence collection against the US government and industry by conducting a long term, sophisticated computer network exploitation campaign.” The claim suggests that China is using hacking techniques to obtain government and industry secrets.

The claim follows a series of computer virus and security attacks on American government departments, many of which are believed to have originated from China.

This report however details how many of these attacks play out, including an attack that exploited an unpatched flaw in Adobe Acrobat that was patched earlier this year.

Citing US Air Force data from 2007, the report says at least 10 to 20 terabytes of sensitive data has been collected from US government networks as part of a “long term, persistent campaign to collect sensitive but unclassified information”.

It’s claimed that some of this information is used to create very targeted and credible phishing messages that then lead to the compromise of even more computers.

The report describes sophisticated, methodical techniques, and speculates on possible connections between Chinese government agencies and the country’s hacker community, increasingly a source of previously unknown “zero-day” computer attacks.

“Little evidence exists in open sources to establish firm ties between the [People's Liberation Army] and China’s hacker community, however, research did uncover limited cases of apparent collaboration between more elite individual hackers and the [People's Republic of China's] civilian security services,” the report stated.

Chinese computer experts highlighted a flaw in a the screening software which could lead to a “large-scale disaster” just a day after the software was made compulsory for all computer systems sold within the country.

The Chinese government, which employs strict censorship laws on the media and electronic communications, mandated that all computers in the country must include a form of screening software which is designed to filter out any offensive content from the internet.

But researchers have revealed that the software contains a series of flaws that could allow a hacker to distribute malicious software including computer viruses and spyware.

“We found a series of software flaws,” Isaac Mao, a blogger and social entrepreneur in China, as well as a research fellow at Harvard University’s Berkman Center for Internet and Society, told the BBC.

In one example, Mr Mao highlighted that tests had shown that communications between the software and the servers at the company that developed the program were unencrypted.

He claimed that this could allow hackers to “steal people’s private information” or “place malicious script” on computers in the network to “affect [a] large scale disaster.”

The launch of the software has attracted further criticism, with claims that the filter is only effective on Microsoft Windows PCs and running the Internet Explorer browser. Those using Mac or Linux operating systems, as well as Windows users opting for alternative browsers such as Firefox have reportedly been able to bypass the software.

China has long had a policy of restricting internet use in the country, with several high profile sites and news agencies banned to Chinese users in what has been dubbed “The Great Firewall of China” in what is widely seen as an attempt by Chinese authorities to play down criticism of the country’s current regime.

In response to criticism from the Western media, Chinese authorities relaxed many restrictions during the 2008 Beijing Olympics but more recently, sites such as Blogger and Twitter were reportedly banned to Chinese users last week due to the 20^th anniversary of the Tiananmen Square protests.