The holiday firm Thomas Cook added to the growing gloom on the UK economy when it warned profits would be lower than expected because of the "massive impact" of the volcanic ash cloud and bargain-hunters booking holidays later than usual.
Group chief executive Manny Fontenla-Novoa said UK consumers were the least confident about prospects in Europe and he expects 2011 to be just as tough for the UK holiday market.
"Confidence levels are coming back in France, Holland and Germany and certainly northern Europe, but not in the UK," he said.
The Thomas Cook update followed a similar warning from rival TUI Travel, which operates Thomson Holidays.
Mr Fontenla-Novoa said if Thomas Cook had not reduced capacity for summer and winter holidays, it would be "absolute carnage" in the market.
In the last four weeks to August 8, UK bookings were down by just 2%
Thomas Cook now expects to post full-year earnings before interest and tax of between £404m to £405m compared to the previous consensus forecast of £415m. It estimated the total financial impact from the volcanic ash cloud disruption would be £81.9m, compared to its initial estimate of £60m to £80m.
Due to a cut in capacity, Thomas Cook's summer programme is 85% sold, in line with last year. It said 156,000 holidays were left to sell before the end of its financial year.