The 1999 Tournament, which started on Monday and continues until 2 August, will be the last of the events which take place every year at Earls Court in London.

The BBC's Sarah Harper: "The tournament has raised £3.5m for service charities"

The 118-year-old event will be replaced by an annual military tattoo in central London, plus a military festival in various other locations.

The first festival in 2001 will be held at Portsmouth, Hampshire, where the Royal Navy is already planning to run a maritime festival. Each of the three services will take it in turns to host the event.

Defence Secretary George Robertson said on Monday: "These all-day experiences will enable the armed forces to reach out to a wider audience, with spectators able to see a range of military activities, look around military equipment, meet personnel and get stuck into interactive displays."

An indoor arena is considered unsuitable for modern displays

A one-off event next year which will form part of the UK's millennium celebrations.

The Royal Military Tattoo 2000, to be held at Horse Guards' Parade from 10 to 15 July, will have a theme "Defence of the Realm: Past, Present and Future".

It will include a 90-minute multi-media show on the history of the armed services, fly-pasts and parachute landings.

It has been argued that the tournament had become outdated, and that an indoor arena was unsuitable for displays of modern military techniques.

The BBC's David Sillito: "Royal Tournament is the biggest, oldest military tattoo in the world"

Mr Robertson said: "The Royal Tournament has in recent years lost audiences, money and deepened overstretch in the forces. It is time to re-invent and reinvigorate the shop window of Britain's military mission."

Mr Robertson confirmed that the end of the Royal Tournament would also mean the end of its most famous individual event, the Royal Navy Field Gun competition.

The Field Gun competition will also end

The Field Gun celebrates the lifting of the siege of Ladysmith in 1899, after Royal Navy gunners dragged naval guns over long distances of South African terrain during the Boer War.

It consists of a race between 18-man teams to haul a 2,088lb cannon and attachments across an obstacle course of ramps, walls and a 28ft-wide chasm, using hoists and beams.

It has formed the centrepiece of the tournament since it was first staged in 1907.

Lost audiences and money

The Royal Tournament was the brainchild of entrepreneur John Rafferty, who organised the first event at the Agricultural Hall, Islington, north London, in 1880.

The first event was a flop, but in subsequent years it became more spectacular and more popular.

After moving to Earls Court in 1950, the tournament drew audiences of 350,000 every year.

But by the early 1970s, its popularity waned and the services gradually began to withdraw their manpower, leaving the tournament to find £350,000 in civilian wages for the work previously done by service personnel.

In 1992 the show was cut from three weeks to two, and lost its financial viability.

The Ministry of Defence had considered, but rejected, requests to fund the event.