The industry should not expect a strong or speedy economic recovery, former Chancellor Norman Lamont told the ABTA Travel Convention in Barcelona.
Lamont gave ABTA delegates a sober view of the road ahead, with the UK at risk of a double-dip recession.
“There are plenty of signs of recovery, but recuperating what has been lost in the recession could be a long way away,” said Lamont, adding: “The UK seems to be lagging behind France and Germany.”
He said he was “very cautious” about recovery, pointing out: “People started to talk about green shoots before the recession barely began.”
Lamont was Chancellor during the last recession in the early 1990s, when the UK was forced out of the system that fixed the exchange rate of the pound against other major European currencies.
UK outbound tourism benefited from the subsequent rise in the value of sterling, but must now pay a price for the pound’s weakness against the euro.
Lamont said: “Governments have been chucking money around, but they cannot do that indefinitely. Company profits have been okay because firms have been making savings, but they cannot do that forever. House prices are still way above their long-term relation to average earnings.
“The stock market rise is dramatic – the sharpest rise since 1933 – but not entirely comforting. When you cannot make money from bank deposits, it is no surprise people invest in the stock market.”
He warned: “There is a chance of a double-dip recession. The future may be difficult.”
The former Chancellor said: “Governments were right to rescue the banks. But that does not mean the banks are in good health. There is a danger of them becoming zombie banks – existing but not lending.”
He added: “Recovery is far too dependent on government support and at some point that will have to be turned off. Someone has to pay – we all have to take a hit – and I fear recovery will be slow. But a slow recovery would be better than a rapid bounce that produces the same problems.”