The tourist industry is vital to London's economy and we must all work together to bring visitors back

Mayor Ken Livingstone

Speaking at the switching on of the Christmas lights in Regent Street, he said the crisis had created an "unprecedented situation for London" which demanded a "rapid response".

"It's clear that visitor attractions, hotels and theatres have been hit particularly hard [because of] people's reluctance to travel into central London," he told the crowd who gathered to watch the seasonal switch-on.

"People are understandably nervous, but the tourist industry is vital to London's economy and we must all work together to bring visitors back."

London receives 50% of overseas visitor spending and stands to have lost up to �1.5bn in 2001.

Opera star Russell Watson switched the lights on

Tourism is worth �8bn to its economy and employs 275,000 people.

The cash includes �3m from the London Development Agency and this money has been earmarked for additional business and promotional activity.

A further �1m has been provided by the Department of Culture, the Small Business Service and other government sources.

Trade Secretary Patricia Hewitt hoped the package would "offer real help and support".

She said: "It's important that everyone plays their part in helping businesses through these difficult times, which is why we've been working hard to make this happen."

Teresa Wickham, chair of the London Tourist Board and Convention Bureau, said the money was "the first crucial step for recovery".

Mr Livingstone has also pledged �500,000 to fund 100,000 free or discounted tickets for London theatre shows.