Judging by the ever-present queues outside London top sights, whether the long-standing Madame Tussauds or the recent London Eye, it is difficult to believe the UK has a problem in attracting tourists.

But long before the foot-and-mouth outbreak, the UK already faced difficulties shoring up its falling share of the world tourism market. Its share of international tourism arrivals fell last year to 3.6 per cent from 4.2 per cent in 1995, according to the World Tourism Organisation, the UN-affiliated body. The erosion has been a long-term process: in 1980, the UK's market share was 6.7 per cent.

The fall is partly due to rapid growth in travel elsewhere. Europe is a mature market compared to other markets. Travel to East Asia and the Pacific has more than doubled in a decade. In 1996 China replaced the UK as the fifth most popular destination in the world, pushing the UK to sixth place which it still holds.

But the UK has lost market share within Europe as well, falling from 7 per cent of tourist arrivals in 1995 to 6.2 per cent last year. Its share of tourism spending is higher at 8.6 per cent but this proportion is also down from 9.6 per cent in 1990.

The main reason for the decline over the period, say tourism chiefs, has been the the pound's strength. "We've monitored elasticity of demand to movements in exchange rates," says David Quarmby, British Tourist Authority chairman. "Every 10 per cent movement in the exchange rate loses or gains us 13 per cent in inbound tourism revenue."

Many reckon progress has been made in addressing the shortcomings identified five years ago, notably the quality and availability of affordable accommodation. Well-regarded budget hotel chains, such as Travelodge and Travel Inn have grown rapidly during that period.

However, others say changes to grading accommodation have been a lost opportunity. England operates a different grading scheme from Wales and Scotland, after the three tourist boards were unable to agree a single scheme. Some believe there should be statutory scheme for grading hotels instead of the current voluntary scheme.

Nevertheless, sterling's strength is regarded as the main factor behind the fall in overseas visits in 1999, the first drop since 1991 when tourist numbers fell in the aftermath of the Gulf War and recession. Visits by overseas tourists were down for the second year running last year to 25.2m.

Western Europe is the UK's main regional market. The pound has increased in value by about 40 per cent against the French franc and the D-Mark since 1995. Visits from Europe - which accounts for about two-thirds of overseas visitors - fell by 4 per cent last year compared with 1999.

However, the exchange rate has worked in the UK's favour in North America. This market has grown by 32 per cent over the past five years, thanks to the pound's weakness against the dollar. The US is now the UK's largest country of origin for tourists and is especially valued for its high spending visitors. Last year US travellers spent £2.6bn - more than the next four out of the top five countries, France, Germany, Irish Republic and the Netherlands put together.

But the pound's strength has also encouraged the growing trend for more UK residents to holiday abroad. Last year the travel account of the UK's balance of payments was a record £11.4bn shortfall.

This deficit began 20 years ago as the rise of cheap packages made holidays in the sun an affordable alternative to uncertain weather at home. In 1998 the British National Travel Survey says for the first time the number of holidays of four nights or more taken abroad exceeded those taken at home.

Graham Wason, chairman of the Tourism Society, believes though the industry can do nothing to affect the value of sterling, it the industry can mitigate the repercussions of the high pound by investing more in improving Britains' tourism product and in marketing. But "private sector investment will only come in a well-supported environment," he says. "The UK needs to fund national marketing; no one is marketing England to the English - that is a lost opportunity."

Mary Lynch, chief executive of the English Tourism Council, says greater government assistance is vital if the UK is to keep up in an competitive marketplace.

"Over the past 10 years, we've been losing share of the long holiday market and the youth market and gaining business tourists and those visiting friends and family. That is a very worrying trend - it indicates that we're less attractive to those those with complete freedom of choice," she says. "We can compete in lots of ways but you have to go out and fight for the business."

Although the industry has lobbied for more funds from government, Ms Lynch says a change in government attitude is more important. This includes prioritising tourism and thinking about the implications on the industry of policy changes elsewhere.

Like Mr Wason, she also believes the private sector would be more willing to increase its investment if the government encouraged tourism through increased investment in transport, infrastructure and information technology, and changed its policy onin areas such as visa policy.