By Mohammed Abbas and Olesya Dmitracova
LONDON (Reuters) - British Prime Minister David Cameron urged global business leaders gathered in London on Thursday to invest in Britain, which despite the glamour of the Olympics is still reeling from the worst economic slump since the Great Depression.
Cameron's appeal came a day after fresh data showed the economy shrank far more than expected in the second quarter, battered by everything from an extra public holiday to the euro zone crisis, raising fresh calls for a new rescue plan.
However, Cameron and finance minister George Osborne said they were resolute in seeing through their seven-year austerity plan to cut Britain's budget deficit, and were backed by the Organisation for Economic Co-operation and Development (OECD).
"Yes, I want medals for Britain. And there will be no more passionate supporter of Team GB than me. But I've got a job to do this summer. A big part of that job is to get behind British business," Cameron told the high-powered audience.
High-flyers from the world of business and finance and key policy makers attended the investment summit, the first of several designed to capitalize on July 27 to August 12 Games, including International Monetary Fund Managing Director Christine Lagarde and Google's Executive Chairman Eric Schmidt.
"We've taken bold decisions to sort out our public finances and earn credibility with the markets .... And my message today is clear and unequivocal. Be in no doubt: we will go on and finish the job," Cameron added, deflecting calls to re-think his government's flagship austerity program.
Cameron also reaffirmed his commitment to improve regulation of Britain's banking sector, whose reputation has been hit by a bank rate-fixing scandal in recent weeks.
The British public are suffering the harshest austerity squeeze for a generation, and are increasingly losing confidence in the government's cost-cutting drive as successive economic reports show little improvement in Britain's finances.
"TONNE OF BRICKS"
Osborne, who is under increasing pressure amid speculation he could be replaced, said he would not waiver on austerity.
"You will hear those arguing that we should abandon our plan and spend and borrow our way out of debt. You hear that argument again today. These are the siren voices luring Britain on to the rock. We won't go there," Osborne said.
OECD Secretary-General Angel Gurria echoed his view.
"There are particularly acute dangers on appearing to waver or appearing to hesitate or appearing to lose a little bit of nerve," he said at the summit, adding to his comments earlier that financial markets would come down on Britain "like a tonne of bricks" if it wavered on deficit reduction.
Instead, the government is trying to boost foreign investment and stimulate the private sector, and hopes the Olympic Games - the first to be held in Britain since 1948 - will showcase Britain as a business destination.
Cameron hopes that will help assuage critics who see the 9.3 billion pound (14.5 billion) cost of hosting the Olympics as too expensive given Britain's strained finances.
Britain reported this week a gain of nearly 53,000 new jobs in the 2011-12 financial year from inward investment, an annual rise of 26 percent.
However, figures from the United Nations World Investment Report show that $54 billion of foreign direct investment in 2011 is only a fraction of the $196 billion recorded in 2007, before the global banking crisis.
Britain's economy may be faltering, but financial markets for now appear to still have confidence in Cameron's austerity plan and Britain's borrowing costs remain relatively low.
Bank of England Governor Mervyn King, European Central Bank President Mario Draghi and Mexico and Brazil's central bank chiefs all warned of the deep challenges facing the wider global economy and Britain's euro zone trading partners in particular.
Lagarde also warned of the risks facing the United States, and the danger of higher oil prices due to geopolitical jitters.
"Europe is obviously in the epicenter of the (global) crisis at the moment but the U.S. is still at risk," she said.
"Risk number one starting west is clearly the fiscal cliff in the United States of America where the deficit and debt to GDP (Gross Domestic Product) are worse than in the euro zone .... there's great uncertainty about how congress is going to deal with this fiscal cliff," she added.
Despite the economic gloom, London's mayor Boris Johnson sought to give a more upbeat outlook.
"In the coming weeks, with major global investors in town for the Games, I am embarking on a gigantic schmooze-athon, to highlight this and the wealth of other amazing investment opportunities that exist," he said.
(Additional reporting by David Milliken, Tim Castle and Estelle Shirbon, editing by Justin Palmer and Pritha Sarkar)