By William Maclean

LONDON (Reuters) - Britain's largest spy service, losing cyber specialists to better-paying private employers, unveiled an online security competition open to all Britons on Wednesday to identify future espionage recruits and raise awareness of cyber attacks.

The Government Communications Headquarters (GCHQ) said those aged 16 or over and not already working in cyber security could apply to test their ability to guard a computer network but only 150 contestants at most would be eventually allowed to compete.

While politicians around the world are increasingly worried by cyber threats, Britain sees them as a particular priority because GCHQ has had problems retaining Internet sleuths who can double or triple their salaries in the private sector.

GCHQ director Iain Lobban, whose service breaks codes and intercepts communications, said in October 2011 that British government and industry computer systems were facing a "disturbing" number of cyber attacks that posed a threat to Britain's economic wellbeing.

In a June 2012 speech, Jonathan Evans, Director-General of the MI5 Security Service, warned of "industrial-scale" cyber espionage and theft against Britain and cited the case of an unnamed London-listed company which lost 800 million pounds ($1.24 billion) as the result of a state cyber attack.

The test, called Balancing the Defense, will run from October 1 to 8 and require the players to analyze a mocked-up government computer communications network and look for vulnerabilities that an attacker could exploit.

TIGHT BUDGET

They will be asked to prioritize the threats and suggest defensive controls, both technical and policy-based, to reduce risks while abiding by a tight budget, organizers say.

Participants must be Britons resident in the United Kingdom and will have to supply personal details when they apply to play at https://cybersecuritychallenge.org.uk/registration/.

Karl, a GCHQ official who declined to give his full name for security reasons, told Reuters the service had designed the competition to have a maximum of 150 players.

Those not chosen to play would be able to apply to other cyber contests promoted by Cyber Security Challenge UK, an educational organization supported by the government and the private sector to raise Britain's cyber skills. Those will be accessible from the same website link.

Karl said the intention of the GCHQ test was to raise the public's knowledge of cyber threats and also identify potential gifted recruits for the spy service and for the private sector.

A GCHQ statement announcing the game made no mention of its staffing situation, but said the service was committed to finding and developing new cyber security skills in Britain.

Parliament's Intelligence and Security Committee, which oversees Britain's spy services, said in a 2011-2012 annual report that its main concern about the agencies' staffing was "the ability of GCHQ to retain Internet specialists".

It said GCHQ was "losing critical staff with high-end cyber technology skills at up to three times the rate of the corporate average". Employing more than 5,000 staff, GCHQ has almost twice as many people as each of its sister agencies MI5 and MI6.

It is not the first such test by GCHQ. It devised an online competition called "Can You Crack It?" last year. A GCHQ puzzle is currently part of an exhibition on codebreaking at Britain's Science Museum marking the centenary of the birth of World War Two codebreaker and mathematician Alan Turing.

(Editing by Rosalind Russell)