The chancellor has sought to reassure business leaders that he is committed to a stable economy and sound public finances.

Addressing the CBI Gordon Brown said that Britain's hard-won stability will be maintained over coming years.

The Treasury chief moved to calm fears that he is set to breach his own rules on fiscal responsibility.

"We will not yield to any inflationary pressures, any unaffordable wage demands or any short-term quick-fixes or soft options that would risk or squander the huge economic opportunities that our hard-won stability offers the British people," he said.

Whilst he admitted to a challenge ahead he insisted the government is committed to a stable economy.

"Stability is never a final achievement but always a permanent never-ending challenge. Stability first: yesterday, today, tomorrow and always," he added.

The chancellor went on to praise the "can do" business culture and added that British enterprise can learn lessons from the US.

But he also addressed the difficult issue of trade between the UK and America.

Brown announced a new enterprise treaty between Britain and the US aimed at improving productivity.

The announcement, which was made with his US counterpart Jon Snow, came ahead of President Bush's state visit to London.

During talks with the president the prime minister is expected to raise the issue of steel tariffs.

The US policy, aimed at preserving US steel jobs, was recently deemed illegal by the World Trade Organisation.

The tariffs have sparked a wave of criticism about the Bush administration's protectionist approach to trade issues.

They have also led to threats of a full on trade war between the EU and America.

On Monday, former transport secretary Stephen Byers called on the EU to impose its own tariffs against the US.

"It is clear that steel tariffs were introduced for short-term political advantage to deliver on a promise made by George Bush during the last presidential election campaign in order to gain votes in key swing states like West Virginia, Ohio, Pennsylvania and Michigan where the steel industry is a major employer," he said.

"The EU should now indicate that if President Bush fails to comply with the WTO ruling, then it will impose tariffs targeted at the major sectors of employment in politically sensitive swing states."