Where will the UK consumer take their holidays this year? There’s a welter of bad economic news around for us all. Public sector workers and the general economy are likely to suffer as spending cuts bite and tax hikes dampen demand. Perhaps the Coalition Government hopes that by pre-announcing so many of their austerity measures, consumers’ expectations have been managed downwards. If things then don’t turn out quite as badly as they feared, economic growth will rebound.

I noted yesterday, that the Office for Budget Responsibility (OBR) forecasts household borrowing will rise significantly. Perhaps this debt will fund holidays to far-flung locations and the UK tourist will return to the good old days of three breaks a year. Or, for most, perhaps not. Today Thomas Cook reported a slowdown in summer holiday bookings from its UK operations. This news is not a big surprise given the findings of a Markit survey noted here (scroll down to the section headed: ‘And now for some bad news’.

The deterioration in household budgets revealed by the Markit survey is worrying for the economy generally, but especially the travel and tourism sector, many parts of which rely on summer bookings to generate cashflow. In comments on Travel Weekly, Thomas Cook revealed that summer bookings are only 1% ahead of last year, which was poor in itself, forcing the firm to cut capacity. Winter bookings are reported to be 5% down.

Weak demand affecting the UK travel market appears to be a local phenomenon, unlike the wider impact of the slowdown at the time of the global financial crisis. Thomas Cook reported that its sales in Germany, Austria and Switzerland are up 4%. In northern Europe, summer break bookings are 11% higher. In the UK things are different, given the relish with which the Coalition has embraced austerity. In this climate, we can expect more consumers to choose cheaper holiday options this year, such as coach travel and UK breaks.