The value of tourism in Britain's economy is set to rise by more than 60 per cent to £188 billion by 2020, according to a report.

The number of jobs supported by tourism is predicted to increase by 264,000 to 2.89 million in the next 10 years, the report commissioned by VisitBritain added.

The amount of spending per year by overseas residents is likely to almost double from £16 billion now to £31 billion in 2020.

Only the financial and business service sectors are likely to grow faster than tourism over the next few years, said VisitBritain.

The report, by professional services company Deloitte and forecasting organisation Oxford Economics, calculated that the economic contribution home and overseas visitors make to the UK is currently £115 billion a year.

The report said favourable exchange rates, the lure of the 2012 Olympics and the appeal of UK attractions should ensure the tourism sector grows at an above-average 3.5 per cent per annum between now and 2020.

But despite the optimistic forecasts, the report warned that Government intervention would be the key to success, as a range of market failures need to be tackled.

These included co-ordinating marketing to help small and medium-sized tourist businesses who cannot afford to do it themselves, enabling rural firms who face higher costs of operating to adopt innovative technology, and supporting the many districts across the UK that rely disproportionately on tourism as an important source of jobs for low-skilled and part-time workers.

The report said the tourism industry also needs help to improve its ability to predict what facilities would be needed for the tourists that are likely to turn up, to ensure the modernisation of hotels and venues is done in a way that retains their original appeal and authenticity and to adapt more swiftly to new trends such as the growth in older, "grey pound" tourists.

VisitBritain chairman Christopher Rodrigues said the report was "enormously encouraging".

He went on: "The continuing low level of the pound and the approaching Olympics in 2012 give us a tremendous opportunity to promote Britain's attractiveness as a destination to the rest of the world."