Thomas Cook under a cloud after tough summer

Thomas Cook said UK trading was "softer than expected" with a 2 per cent fall in bookings during the last four weeks and the firm is being forced to give away more holidays in the cheap 'lates' market.

Like TUI - whose recent bookings also fell 2 per cent - the operator blamed an "uncertain" climate, good weather and the 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 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 group 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 Chancellor George Osborne's savage emergency Budget in June.

A gloomy batch of recent 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 regions not to see an upturn in bookings in the last four weeks, with bookings in Central and Northern Europe up 21 per cent and 29 per cent year on year in the last four weeks.