London will cash in by £250m as tourists flock to join party

Neil Saunders, of retail consultants Verdict, said: "We think wedding-related merchandise sales could easily top £26million, while food and grocery retailers could cash in to the tune of £360million as consumers buy extra treats to celebrate the occasion, as well as champagne and wine to toast the happy couple."

The impact of extra tourism in London could take the total to £620 million, he said. However, this will have to be offset against policing and security costs as well as any loss of productivity if there is an extra bank holiday.

The first memorabilia started piling up in shops today as Asda rushed out a £5 mug. Crockery companies Aynsley China and Royal Crown Derby began producing items from plates to a hand-painted commemorative china peacock.

Gallery: Royal romance of Prince William and Kate Middleton

Stephen Church, of the UK Gift Co, said: "Every time a royal wedding comes around there's an element of scepticism, but just wait and see what happens as the day comes closer. There'll be street parties and great excitement. I think we'll sell easily as many royal wedding gifts as we did for Charles and Diana in the Eighties."

Unlike 1981, much of it will be made in factories in China and Eastern Europe rather than Britain.

The extra spending will provide a welcome, if small-scale, injection to an economy coping with the withdrawal of £81billion of public spending in the next four years.

It will dwarf the impact of the most recent major royal wedding in Europe, June's marriage of Sweden's Crown Princess Victoria and Daniel Westling, which was estimated to have generated 2.5billion kroner (£230million). The monarchy is already estimated to contribute £500million a year to GDP so the "royal economy" will be worth more than £1billion next year, of which up to half will be spent in London.

The costs of the policing and security operation are unlikely to match the scale of Charles and Diana's wedding, which is rumoured to have cost £30million.

Already there are questions about who will pay for the policing. Jenny Jones, the Green Party member on the Metropolitan Police Authority, warned that budgets were already tight.

She said: "In this age of austerity, it's unrealistic to expect the taxpayer to pay millions of pounds for policing a wedding, however beautiful. We can keep costs down by making it a low-key event or the royal family can contribute. That would seem the fairest solution."

Senior Met officers will soon be appointed to a cross-government committee responsible for planning every aspect of the wedding.

Gallery: Royal romance of Prince William and Kate Middleton