A succession of government U-turns on tax cuts, the removal of the energy price guarantee from April and a warning of “eye-watering” spending cuts will damage demand for travel, warn senior industry figures.
The actions of new chancellor Jeremy Hunt – whose appointment was followed by the resignation of Liz Truss as prime minister on Thursday – pleased the financial markets and appeared to steady the pound but will cause significant damage to household finances, with mortgage rates set to rise and more tax rises and spending cuts promised on October 31.
Alan Bowen, advisor to the Association of Atol Companies, said: “The government is doing handbrake turns. If people aren’t going to get any help with their energy bills from April, they will have to review what they’re spending.
“Another budget on October 31 is not going to help. We’re in a whirlwind. The peaks market is going to be thin. People will say ‘Unless I know what my mortgage and energy bills will be, I’m not going to commit to spending’.”
He argued: “Certain markets will have money to spend. But the average family is going to find life difficult. Package operators already see people asking, ‘How much is this going to cost?’”
Industry accountant Chris Photi, head of travel and leisure at White Hart Associates, warned the government reversal would “unquestionably dampen demand”, saying: “People will have less disposable income. Surveys show people cut back elsewhere before cutting holidays, but many will scale back.”
Yet agents remain largely upbeat. Inspired Travel managing director Kate Harris forecast a section of the market would pull out of booking but said: “People who fly business class and take two or three holidays a year will still be able to afford holidays.”
She reported seeing “a few people ready to book decide to give it a month to see if things settle”, adding: “People aren’t surprised holiday prices are going up but are surprised by how much.”
Advantage Travel Partnership chief commercial officer Kelly Cookes said: “It’s hard to gauge the impact. We finished last week at +33% on revenue and +15% on bookings compared with 2019.”
But she added: “The top-booked months were May, March, January and June [which] indicates the family market is not coming in volume for next summer yet.”
Sutton Travel managing director Andy Tomlinson agreed the picture is mixed, saying: “We’re getting a lot more high-ticket long-haul and tailor‑made bookings. [But] there seems a bit of nervousness. People are worried about committing when they don’t know what is happening.”
A leading airlines figure noted “concern” among carriers, saying: “There will inevitably be an impact. Some markets will get a real hammering. However, beach destinations will still put in a good show. People will still book a summer holiday.”
Inbound operators expressed dismay at the chancellor’s reversal on VAT-free shopping for overseas visitors. UKinbound chief executive Joss Croft said: “We don’t agree tax-free shopping costs the Treasury £2 billion.”
However, he noted: “The crisis doesn’t help us get messages across to government. We’re having to fight to get our voice heard.”