* PM wants 200 bln stg of infrastructure spending
* Cameron urges firms to turn profits into investment
* Says will do more to boost bank lending to small firms
* Tucker says in BoE's mandate to ensure no double dip
(Adds Paul Tucker)
By Matt Falloon and Fiona Shaikh
LONDON, Oct 25 (Reuters) - British Prime Minister David Cameron urged companies on Monday to use more of their profits to expand, and promised to do more to get bank lending flowing to smaller firms as huge cuts in public spending begin to kick in.
Speaking to business leaders, Cameron sought to switch the focus of debate on the economy to growth after unveiling cuts last week which may cost half a million public sector jobs and which some analysts warn could derail Britain's recovery.
"British businesses are rebuilding their balance sheets because they have relatively strong profit and loss accounts," Cameron told the Confederation of British Industry's annual conference.
"If we are to get back to strong growth, these profits need to turn into productive investment."
The Conservative-Liberal Democrat government, in power since May, unveiled the details last week of departmental spending cuts totalling 81 billion pounds over four years and part of efforts to all but eliminate a record budget deficit.
Opposition Labour politicians and some economists have said such severe cuts could drive Britain back into recession, given broad signs of an economic slowdown after a strong rebound at the start of this year.
Economic growth figures for the third quarter on Tuesday are expected to show a marked slowdown from the 1.2 percent growth registered in the previous three months.
Cameron said the government's austerity plans -- which have helped to drive long-term borrowing costs down to record lows -- should give businesses the security they needed to invest.
But Labour leader Ed Milliband accused the government of taking a risk with the economy.
"We do believe that a four-year timetable for halving the deficit would have been a better approach and I do fear that the path the government is pursuing is a gamble with growth and jobs," he told the conference.
"Unless they are sensitive to changing economic circumstances, I believe it makes the British economy a hostage to fortune."
Bank of England Deputy Governor Paul Tucker, also speaking at the event, said Britain's recovery would be "bumpy and uneven" and now was not the right time to raise interest rates.
Asked if he thought the government's spending cuts would push Britain back into recession next year or in 2012, he said: "It's in our mandate to ensure it doesn't." [ID:nLDE69O1HE]
PLAN FOR GROWTH
The coalition wants to unlock 200 billion pounds of public and private sector investment in infrastructure to boost growth.
It has earmarked 40 billion pounds of government money for transport, energy and communications projects and is hoping the private sector will quadruple that.
Cameron announced a 200 million pound investment in the next four years for research into new technologies, bringing together university researchers and business.
"We've got to back the big businesses of tomorrow, not just the big businesses of today," Cameron said, adding that awarding more government contracts to smaller firms would help.
But he acknowledged that lending to small businesses -- crucial to any private sector recovery -- was "still a major problem" and said the government would do more to improve the flow of credit.
"I want to make sure we have a banking sector that is really focused on SME lending, and that's what drives the business, rather than thinking how can I become a bigger and bigger investment bank."
Recent data have shown a rise in the number of people in employment, but the improvement has been driven by part-time workers, while the number employed in full-time jobs, and job vacancies have actually fallen. [ID:nLDE69C0T7]
Analysts reckon the private sector will have trouble creating enough jobs to replace those being cut by the government, especially as the spending cuts may force private companies with public contracts to shed workers.
But CBI Director General Richard Lambert said the private sector had the capacity to create jobs as the public sector shrank.
(Additional reporting by Avril Ormsby and Mohammed Abbas; Editing by Patrick Graham, John Stonestreet)