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Prime Minister Tony Blair Monday urged Britons to steel themselves in the face of new terrorist threats detected almost daily, and warned that waging war on terrorism does not come "without a price".

"This is a new type of war, fought in a different way by different means. But as with all wars, it will test not just our ability to fight, but our character, our resilience and our belief in our own way of life," Blair said.

"It is a war I have total confidence we will win, but will not be without pain or come without a price."

Blair was speaking at the Lord Mayor's Banquet in London -- where traditionally the prime minister delivers his major foreign affairs speech of the year -- and in the wake of the deadly bombings in Bali last month and the siege of a Moscow theatre by Chechen rebels.

"Today's breed of terrorist knows no bounds -- of geography, of inhumanity, or of scale," said the prime minister.

"They are looking for ever more dramatic and devastating outrages to inflict upon the people they claim to be their enemy."

Blair added: "At the moment, barely a day goes by without some new piece of intelligence coming via our security services about a threat to UK interests.

"Some of it will be reliable; some of it may be misinformation being fed in to waste our time chasing shadows. Some of it will be gossip. Other material will be based on technical intelligence gathering."

Blair said if he acted on every piece of raw intelligence he would have had "on many occasions" to shut down roads, railways, airports, shopping centres, factories and military installations.

The prime minister warned that the purpose of terrorism was not just to kill or maim but to spread panic, and said a balance had to be struck by responsible governments.

"The dilemma is warning people without alarming them, taking preventive measures without destroying normal life."

"If, on the basis of a general warning we were to shut down all the places that al-Qaeda might be considering for an attack, we would be doing their job for them," he added, referring to the network blamed for the September 11 terror strikes on the United States last year.

"If a terrorist thought that all he had to do to shut down the travel industry, for example, was to issue a threat against our airports, we really would be conceding defeat in the war against terrorism.

"So we make a judgment day by day, week by week."

The prime minister said the government would take what security measures it could and urged businesses to ensure security precautions were implemented.

"Whether here in the UK or when travelling abroad, all of us as citizens have to be alert, vigilant and to cooperate fully with the relevant authorities."

Blair also used his speech to call for rapid progress in Middle East peace talks, and for the United States to show leadership in achieving greater international unity as well as in fighting terror.

"Above all we need to understand the passion and anger the state of the Middle East peace process arouses," he said.

The only answer was "an Israeli state, recognised by all, and a viable Palestinian state", Blair said, restating Britain's policy on the Middle East.

The prime minister added: "I also believe the world needs a broader agenda than simply terrorism and weapons of mass destruction. And we need full US engagement and leadership on all of it. President Bush recognises that". 

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