Nov. 26 (Bloomberg) -- Prime Minister Gordon Brown, concerned the U.K. economy is weakening, pledged to spur an expansion of Heathrow Airport and construction of new nuclear power stations.

The government this week will outline legislation to streamline the system for granting building and planning permission, make a commitment to build new power stations and detail measures to put unemployed workers into training, Brown said in a speech to the Confederation of British Industry.

The remarks, Brown's first to the nation's biggest business lobby group since he took over from Tony Blair in June, were aimed at firming confidence in the economy among businesses after fallout from the U.S. subprime market collapse spread to the U.K. Brown also is attempting to soften criticism of his plans to eliminate the lowest band of capital gains taxes.

``In difficult times in the past we have been able to and will continue to hold a stable course,'' Brown said in his speech to the CBI in London today. ``Globalization forces us also to make the right long term decisions in infrastructure and planning, the environment and energy, science and education, to leave behind the old policies of yesterday.''

Borrowing Pinch

A CBI survey published yesterday found 35 percent of small and medium-sized businesses were either already experiencing difficulties borrowing or expected to have problems in the next year. The survey, conducted Nov. 6-14, covered management at 500 companies employing 250 or fewer staff.

``A minority are feeling the pinch and have started to scale back business plans, whilst more expect the situation to worsen,'' Ian McCafferty, CBI chief economic adviser, said in an e-mailed statement. ``These businesses are concerned that over the coming year credit will cost more, and lending conditions will tighten. There will clearly be a knock-on effect on investment, jobs and the wider economy.''

The U.K. economy unexpectedly cooled in the third quarter, with growth slowing to 0.7 percent as the collapse of the U.S. subprime mortgage market pushed up the cost of borrowing worldwide. Brown has said there is ``no doubt'' that the U.S. turbulence would spill over into Europe.

``What we're looking for from Gordon is long-term policy,'' Martin Broughton, chairman of British Airways Plc and president of the CBI, said in an interview. ``Planning has been high on our agenda for a long time. If you look back at the debacle of Heathrow's Terminal 5, but also the nuclear issue, we don't want another 25-year planning cycle.''

Souring Economy

The economy may be turning sour just at the wrong time for Brown, whose popularity ratings dropped in recent days to the lowest since he took over from Tony Blair in June. After a decade of keeping the British economy growing as chancellor of the exchequer, Brown is now seeking new initiatives to limit the impact of the subprime fallout.

Top among them is adding a third runway at Heathrow Airport, which serves London and has been the focus of criticism from travelers who say congestion there is hurting competitiveness.

``Even as we place strict environmental limits on noise and air pollution and ensure that aviation pays its carbon costs, we have to respond to a clear business imperative and increase capacity at our airports,'' Brown said. ``You have rightly called for action at Heathrow. Our prosperity depends on it. Britain as a world financial centre must be readily accessible.''

Brown pledged he wouldn't give inflationary pay rises to government workers.

Pay `Discipline'

``There will be no irresponsible relaxation of pay discipline, no unfunded spending commitments, no unaffordable promises and no short term giveaways,'' he said.

The U.K.'s system for approving new buildings and infrastructure, which has been lambasted by the CBI for working too slowly, will also be overhauled in legislation to be unveiled tomorrow.

``Planning, which we all know that despite recent changes remains too inflexible,'' will be ``streamlined,'' Brown said. He also promised to make a decision on replacing Britain's aging nuclear power plants.

Eighteen of Britain's 23 nuclear reactors will reach the end of their lives by 2015. Including gas and coal-fired plants that must be closed, a quarter of the U.K.'s electricity generation capacity will have to be replaced by then.

``New nuclear power stations potentially have a role to play in tackling climate change and improving energy security,'' Brown said. ``Having concluded the full public consultation we will announce our final decision early in the New Year.''

Picking up on one of his favorite causes, Brown also suggested that British welfare recipients have a responsibility to take training programs that can lead them into work.

``For most of the past half century we have had a Keynesian paradigm; either you are in work or are on welfare,'' Brown said. ``What prevented full employment was lack of jobs. Now we need a new and very different paradigm. If in the old days the problem as unemployment, in the new world it is employability.''

To contact the reporter on this story: Mark Deen in London at markdeen@bloomberg.netRobert Hutton in London at rhutton1@bloomberg.net

Last Updated: November 26, 2007 08:25 EST