Market News

Britain’s biggest tour operator has slashed its winter flight schedule as consumers cut back spending amid uncertainty around future tax rises.

Jet2 has cut 200,000 seats from its services to winter sunspots such as Gran Canaria, Tenerife and Lanzarote, as it warned it was facing a “less certain consumer environment”.

Steve Heapy, chief executive, said it was grappling with “a difficult market” and warned that earnings would take a hit as a result.

Rachel Reeves is expected to raise taxes at her next Budget in November, as she battles to lower Britain’s debt pile. Meanwhile, inflation is expected to stay high for the rest of the year, meaning higher costs for consumers.

Analysts at Barclays said uncertainty over the coming Budget appeared to have become a “relevant factor” in people evaluating whether they could afford a winter break, and that they will need “enticing with fare offers” if demand is to be propped up.

Shares in Jet2 plunged as much as 25pc on Thursday following the warning, later paring back some of these losses.

A slump in sales of package holidays will sound alarm bells, as all-inclusive breaks traditionally do well when money is tight. Weakness in the market suggests that consumers may be rapidly reevaluating their own spending power.

Shaun Morton, the chief executive of On The Beach, Jet2’s rival, told the Telegraph last month that outlay on holidays had become almost non-discretionary for Britons – who were prepared to put off purchases such as a new kitchen or car to fund a Mediterranean break.

That may be less so for winter holidays, which have always been viewed as more of a luxury than the traditional mid-summer getaway.

On the Beach shares slumped as much 9pc, while easyJet, which has made package holidays and city breaks a cornerstone of its business model in recent years, fell more than 4pc.

The Chancellor revealed on Wednesday that she would deliver her budget on Nov 26, the latest possible date, as she attempts to salvage Britain’s dire public finances.

Ms Reeves’s first Budget in Oct 2024 raised taxes by a total of £40bn, including unpopular increases for businesses and family farms.

Surging borrowing costs and public sector pay combined with anaemic growth mean she is likely to have to impose a further hike of at least £20bn, and may be compelled to break Labour’s manifesto pledge of not raising taxes on “working people” in the process.

Jet2 said that even after shrinking its winter flight programme it will still be increasing the number of aircraft seats by 9pc to 5.6 million compared with a year earlier.