Thomas Cook: the Brexit bankruptcy?

Thousands of firms go bust each year unnoticed and unmourned. Even among those that do attract headlines the attention of both the press and the public tends to be fleeting. Only a very few bankruptcies have the capacity to define an era. Who can forget the sight of fraught Lehman bankers with their boxes of belongings outside their Canary Wharf office in September 2008? That snapshot encapsulated the abrupt ending of the excesses of global finance and ushered in a decade of hard economic and mean-spirited political times.

The collapse of Thomas Cook 11 years after Lehman’s is far less epochal in itself. The sudden demise of an international tour operator cannot inflict the same collateral damage as that of a giant global investment bank, whose dealings were perilously intertwined with those of other financial institutions, threatening to topple entire banking systems. Yet in cultural terms this week’s images and stories of the company’s holidaymakers may come to be seen as a defining moment in Britain’s departure from the EU: the moment of the Brexit bankruptcy.

Like Tolstoy’s unhappy families, every failing company fails in its own way. Thomas Cook has collapsed for several distinctive reasons. Chief of them has been the intensifying commercial challenge of the internet where people can arrange their own trips and cut out the middleman. That left the tour operator’s business model as stranded as its holidaymakers this week, with over 500 high-street branches that had become a burden rather than an asset. The firm became saddled with debt as it struggled unsuccessfully to rebuild its decaying fortunes.

The decision to close down the firm came after attempts under way since July to restructure the company’s debts and to inject new funding finally failed. But an underlying factor in the firm’s difficulties has undoubtedly been Brexit and the uncertainties it has generated. Managers pointed the finger at the “uncertain consumer environment particularly in the UK, leading to intense competition” when announcing the first outline of a rescue plan in July. And Brexit has also hurt tour operators because of the weakness of sterling which has dampened demand for foreign travel.

But Thomas Cook will come to be seen as the Brexit bankruptcy more through its impact than its precise causes. For one thing, it is no ordinary firm. Founded in 1841, the travel company came into being as Britain was approaching its moment of peak power. A decade later the Great Exhibition put Britain’s industrial prowess on display and Cook arranged transport for people in the Midlands wanting to visit it. The firm became a standard-bearer for the growth of tourism that has been part and parcel of the modern era. Its demise, through a failure to adjust to the changing nature of competition, is yet another reminder of the futility of the nostalgia that infuses the Leave cause.

Most telling of all, just weeks before Britain is scheduled to leave the EU, if necessary without a deal, the government is having to launch the biggest repatriation of its citizens in peacetime history. No doubt “do-or-die” Brexiters will wrap the flag round this emergency operation, representing it as a Dunkirk of the air that shows Britain at its best. But as Churchill himself told the House of Commons in June 1940, an evacuation is not a victory.

The bankruptcy of one of Britain’s best-known firms and the rescue of its hapless clients from around the world is hardly a convincing prelude to the glories of “Global Britain” that supposedly lie ahead. Instead it feels like a dress-rehearsal for the horrors of a no-deal Brexit, and the stresses that will put upon vulnerable British companies and economic sectors such as agriculture.

For the biggest worry of all about Thomas Cook is that the Brexit bankruptcy may prove to be the herald of further damage to come. In 2008 the government rightly intervened to protect the economy from a banking collapse. In 2019 it is threatening to inflict harm on the economy through a no-deal Brexit. That is a bankruptcy of political purpose.