Thousands of holidaymakers in re-booking nightmare as travel firms face financial uncertainty

Britain's holiday industry is heading for a crash as the credit crunch takes a heavy toll with reduced bookings as Britons tighten their belts, experts warned today.

They fear the slowing economy combined with the high cost of euros, as well as soaring food, petrol and utility prices could spark "the perfect storm" and cause hundreds of travel firms to collapse.

Already one in five Britons have cancelled plans to go on holiday in the wake of the credit crunch.

And just last week two travel firms collapsed - with experts now fearing many more will soon follow.

Now amid reports of disappointing sales in April, Chris Photi, of accountancy firm White Hart Associates, gave a dire warning of things to come.

He told Travel Trade Gazette: "We have fuel and food costs going through the roof, operators and cruise lines surcharging, the strong euro and strengthening dollar.

"People can't get mortgages and house prices are falling. This is the perfect storm. The travel industry is immensely resilient, but is it this resilient?

"All we need now is for the sunshine to continue for another three months and it gets worse."

Alan Bowen, travel consultant and former head of legal services at Abta, said: "Business is not as wonderful as many people would like.

"February and March were good, but the tap was turned off in April and the bookings disappeared."

Mr Bowen discounted flights suggested airlines were having to stimulate demand and that this was benefiting flight-only sales.

However, he was concerned for the future of medium-sized firms being squeezed by the big operators from the top, and no-frills airlines from below.

"This is going to be a year that shows up the good from the bad. For those who have not got a plan for a downturn, it will be difficult," Mr Bowen added.

The warning came after Barwell Travel and Mayflower Travel, which specialised in package holidays to Spanish resorts collapsed.

One in five Brits have cancelled their plans to go on holiday as a result of the economic downturn, a survey by Savebuckets.com revealed.

The survey of 2,000 Britons showed that price hikes on staples such as food and utilities have left holidays low on the list of priorities, said the price comparison site.

While one in five will not be going away, more than one in ten will be opting for a UK rather than overseas break to save money.

One in ten will resort to breaking into their savings to pay for a holiday.