Thomas Cook warns on weak UK economy as profits tumble

The tour operator Thomas Cook added to the growing gloom about Britain's economy yesterday when it warned that its profits would be at the lower end of expectations. It said it had been hit by bargain-hunters booking their holidays later and the chaos from Iceland's volcanic ash cloud.

Manny Fontenla-Novoa, the group chief executive of Thomas Cook, said that with the possible exception of Belgians, British consumers were the least confident about their prospects in Europe. He also expects 2011 to be just as tough as for the UK holiday market as this year has been.

Mr Fontenla-Novoa said: "Confidence levels are coming back in France, Holland and Germany and certainly northern Europe, but not in the UK."

The update from Thomas Cook followed a similar profits warning issued the day before by its biggest rival, Tui Travel, which operates Thomson Holidays. Mr Fontenla-Novoa said that if Thomas Cook had not reduced capacity for this year's summer and winter holidays, it would have been "absolute carnage" in the market.

Across the consumer sector, companies ranging from the fashion chain Next to the high-street baker Greggs have warned this month of faltering consumer confidence. The Bank of England compounded the downbeat mood yesterday by saying that economic growth would be slower in 2011 than previously thought.

Mr Fontenla-Novoa said that after the "massive impact" of the volcanic ash cloud in the middle of May, its UK business did not recover until August. In the four weeks to 8 August, bookings by British holidaymakers were down by just 2 per cent. Thomas Cook's woes in May, June and July – when it was forced to sell holidays at lower margins – were compounded by uncertainty caused by the aftermath of the election and build-up to and impact of the emergency Budget. Demand for holidays also took a hit from the balmy summer weather.

Thomas Cook now expects to post full-year earnings before interest and tax of between £404m to £405m, compared with the previous consensus forecast of £415m. Mr Fontenla-Novoa said: "The UK market has been softer than we thought it was going to be, even though we had always taken a conservative view."

Thomas Cook estimated that the total financial cost of the volcanic ash cloud disruption would be £81.9m, compared with its initial estimate of £60m to £80m. The company said that because it had cut capacity, its summer programme was 85 per cent sold, which is in line with last year. It has just 156,000 holidays left to sell in August and September before the end of its financial year.

In contrast, rival Tui increased its summer capacity this year and will be forced to offload thousands of packages at reduced prices. For the nine months to 30 June, Thomas Cook's pre-tax losses widened to £368.8m from £306.1m last year.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooksNow available in paperback
Life and Style
The 67P/CG comet as seen from the Philae lander
scienceThe most important scientific breakthroughs of 2014
Arts and Entertainment
Ian McKellen as Gandalf in The Hobbit: The Battle Of The Five Armies
Arts and Entertainment
Sarah Koenig, creator of popular podcast Serial, which is to be broadcast by the BBC
tvReview: The secret to the programme's success is that it allows its audience to play detective
Ruby Wax has previously written about her mental health problems in her book Sane New World
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Marketing Services Manager - (communications, testing, DM)

£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

Guru Careers: Finance Account Manager

£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas