Thomas Cook warning amid holiday discounts

Anxious stay-at-home Britons triggered a second profit warning from a major tour operator in as many days yesterday as Thomas Cook joined Thomson Holidays-owner TUI Travel in the doldrums.

Thomas Cook said UK trading was "softer than expected" with a 2 per cent fall in bookings during the past four weeks and the firm is being forced to sell more holidays in the cheap "last-minute deals" market.

Like TUI - which reported a similar drop in recent bookings on Tuesday - the operator blamed an "uncertain" climate, good weather and the football World Cup for the trading pressures as well as disruption from Iceland's volcanic ash cloud.

Average prices are 3 per cent higher, but have not risen by as much as Thomas Cook previously hoped because of the weaker booking trends in May and June - leaving expected profits at the lower end of market hopes.

Thomas Cook chief executive Manny Fontenla-Novoa said he "always expected" a challenging year, as the firm faced headwinds from a stronger pound diminishing its euro-based takings.

The tour operator cut its winter holidays, decided not to increase the amount of summer breaks it sells, and is pushing through rate reductions with hoteliers to cut costs.

Consumer nerves over the economy and looming public spending cuts have mounted since George Osborne's savage emergency Budget in June.

A gloomy batch of economic figures have shown falling house prices, a sharp slowdown in high street sales and consumer confidence falling to its lowest level for more than a year.

Discounting the impact of the ash cloud which closed European airspace in April - costing Thomas Cook almost 82 million - third-quarter profits were 10 per cent above the same period last year.

But the UK is the only one of its major European markets not to see an upturn in bookings in the past four weeks, with bookings in central and northern Europe up 21 per cent and 29 per cent, respectively, year-on-year.

While customers may be holding back on booking holidays, those who are heading abroad plan to beef up their spending money, according to a YouGov survey commissioned by Bread pre-paid Mastercard.

The study showed that 42 per cent of Scots plan to spend more money during holidays abroad this year than they did last year. Some expect to spend an extra 20 per cent.