The UK tourism industry has slammed the government’s decision to reduce VisitBritain’s funding by 18 per cent over three years.

By 2011, the tourism agency will receive £40.6m in DCMS funding, compared to the £49.6m it receives now.

The cuts come as a result of the government's Comprehensive Spending Review (CSR), which aims to identify what further investments and reforms are needed to equip the UK for the global challenges of the decade ahead.

As part of the CSR report, culture secretary James Purnell has asked VisitBritain to conduct its own review of how best to maximise the impact of DCMS tourism funding to market Britain.

“I recognise VisitBritain’s key role in delivering the 2012 Olympics tourism legacy and will review available resources for VisitBritain to work with the private sector as we get closer to the Games,” said Mr Purnell.

However, Christopher Rodrigues, chair of VisitBritain, countered: “Global tourism is increasingly competitive and the tourism industry will have to fight hard if Britain is to retain its place in the global tourism league.

“The government has chosen to increase funding for our cultural institutions which form a large part of this country’s draw for visitors. While this is laudable, the offer of free entrance and galleries will not in itself persuade most international tourists to come to London instead of Paris, New York or Hong Kong.

“This settlement also reduces the funding available to promote England at home and overseas. We will need to become even more efficient in the marketing partnerships we have with the travel industry and the regions and nations to plug the gap this settlement has created.”

The Tourism Alliance said the decision represented a “lamentable understanding of tourism and a lack of joined-up thinking”, while UKInbound said it was “shocked and horrified”.

Stephen Dowd, chief executive of UKInbound, said: “This announcement confirms that the DCMS has completely lost the plot. The London 2012 Olympics could provide a once in a generation opportunity to promote the UK as a tourism destination to a global audience and for the secretary of state to forego this opportunity is utter madness.”

Operators objected to the decision too. Nick Varney, chief executive of Merlin Entertainments, hit out at the DCMS, saying: " In the same breath that this government acknowledges the vital importance of the tourist industry to all parts of the UK – injecting over £85bn a year into the economy and employing 1.4 million people – it chooses to cut funding to the nation’s only vehicle promoting tourism outside these shores, then justifies this by expecting private industry to fill the financial gap!

"This decision defies logic and is yet another example of the government’s apparent contempt for one of the jewel industries in the UK’s crown."

Photograph: Culture secretary James Purnell