Visit London, the capital's tourism agency, could be forced into making redundancies following a less than anticipated budget increase from the London Development Agency (LDA).
The tourism agency is expected to receive lower than a two per cent increase in 2008-09, less than half the current 4.4 per cent rate of inflation.
The funding cut is due to the LDA being required to find a cash reduction of 2.4 per cent a year, in its own activities, between 2008 and 2011.
The cuts have resulted in increased criticism for the government's perceived lack of value and support for the UK tourism industry.
Kurt Janson, policy director at Tourism Alliance, said: “The Tourism Alliance is very disappointed in the below inflation increase in funding granted to Visit London, especially combined with the 18 per cent reduction in funding for VisitBritain in the lead-up to the 2012 Olympics.
"Britain’s success at Beijing is a direct result of the Government investment in its athletes. In the same way, if we are going to win the tourism gold medal in 2012, the Government needs to provide that same level of investment in VisitBritain and Visit London so that they can successfully compete on the world stage.
"As with Britain’s athletes, the 2012 Games provide a once-in-a-lifetime opportunity for tourism. Let’s not squander that opportunity.”
Rania Wannous, corporate affairs and communications manager for Visit London, said: "Although the increase in Visit London’s budget is less than had been originally anticipated and some re-adjustments to planned programmes need to be made, these will not impact on marketing budgets."
Visit London recently announced plans for £4m global advertising campaign for London 2012 Olympics, called See the World, which will be launched on the 24 August at the handover of the Games from Beijing to London.
Major of London Boris Johnson, said: "This is the largest campaign launched by Visit London and it really captures the excitement and anticipation of the Olympic handover to our capital. London is a global leader in arts and culture and this campaign urges tourists to come and experience our world-city for themselves"
The campaign will consist of different formats including press, radio, online and outdoor promotion across Britain, North America, South America, Europe, Australasia, China, India and Russia.
Visit London's chief executive James Bidwell said: "Tourism in London is big business and the London 2012 Olympics has a deliverable legacy with a potential £2.2bn incremental revenue opportunity for London alone."
A report by Oxford Economics estimates that the number of visitors to London for the 2012 Games will be over 908,000 and of these 586,000 are domestic visitors and almost 322,000 are overseas.
Bidwell also acknowledged the success of Team GB in Beijing and said: "It will only energise the British public ahead of our own London Games in 2012. No doubt great sporting expectations and results will help us deliver the 2012 tourism legacy."
