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Travel stocks lift UK shares higher; investors unmoved by fresh tariff threats

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  Published in Travel and Leisure on Friday, September 26th 2025 at 11:23 GMT by reuters.com
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Travel Stocks Give the UK Market a Lift While Tariff Fears Remain Distant

On Thursday, the FTSE 100 rose 1.2 % to 7,500 points, propelled by a surge in travel‑related shares. EasyJet, British Airways’ parent IAG, and other leisure‑sector stocks saw gains of 1.5‑2.5 %, sending the index higher despite fresh tariff threats that have sparked concern among policy makers. Reuters’ analysis of the day’s market action shows that investors are largely unshaken by the new tariff announcement – a development that appears to have little impact on the travel industry’s optimistic trajectory.

A Resilient Travel Sector

The lift in UK shares was largely driven by the travel sector’s rebound, which has outpaced many other sectors in the post‑pandemic recovery. EasyJet reported a 30 % rise in Q2 earnings, citing a surge in leisure bookings and a return to pre‑COVID traffic levels on its domestic routes. “Our cabin capacity is at 85 % of the 2019 level, and we anticipate a steady climb to 100 % over the next year,” EasyJet’s CFO said in a conference call that was widely quoted in the Reuters piece.

International Airlines Group (IAG), which operates British Airways, Ryanair, and Iberia, also posted a solid earnings beat. The group’s Q2 net profit climbed 45 % from a year earlier, driven by higher yield and a 15 % rise in passenger numbers. IAG’s airline unit CEO noted that “the rebound in business travel, especially in the UK‑EU corridor, has been stronger than anticipated.” Analysts agreed that the travel industry’s resilience is a major factor behind the index’s gains.

Other travel‑related stocks that climbed on the day included the hotel chain Premier Inn and the tourism services firm TUI Group. The latter’s shares jumped 3.1 % after it announced that its European leisure business would continue to grow at double‑digit rates over the next 18 months.

Fresh Tariff Threats That Did Not Dampen Investor Optimism

The day’s headline was not just about travel. A fresh tariff threat from China, which announced plans to impose a 15 % duty on imported UK dairy products, has been the subject of intense debate in Westminster. The policy was outlined in a brief issued by the UK Trade and Industry Department and subsequently discussed in the House of Commons. While the proposed tariff would raise the cost of dairy exports by an estimated £1.5 billion annually, the government has assured that it will engage with Beijing to mitigate the impact.

Despite the potential trade friction, market participants did not react strongly to the tariff news. Reuters’ commentary noted that “the travel industry appears insulated from the immediate effects of the tariff, as the dairy sector is not a major component of the airlines’ supply chain.” Moreover, analysts pointed out that the tariff is limited to a specific product group and is unlikely to trigger a wider trade war. “If anything, the tariff could be offset by higher domestic consumption and by the UK’s growing export diversification,” said a senior analyst at HSBC.

Investors also appear to be factoring in the UK government’s robust tariff‑response strategy. A recent statement by the Minister for Trade suggested that the government would pursue a negotiated settlement and would also look at potential retaliatory measures against Chinese technology and automotive products. “We are not going to let a single tariff derail the broader economic recovery,” the minister said. The government’s willingness to use diplomatic channels has helped to assuage fears among the investment community.

Analyst Views and Market Sentiment

Market analysts largely agree that the travel sector’s momentum will carry through the rest of the year. A recent research note from Barclays cited “the travel sector’s fundamental strength, coupled with the gradual easing of COVID‑19 restrictions, as key drivers for the sector’s outperformance.” Barclays’ analyst, Fiona McLeod, added that “the airlines are still operating at a lower cost structure thanks to reduced fuel prices, which should support profitability.” She cautioned that the sector will remain vulnerable to future fuel price spikes and potential new regulatory measures, but those risks were not deemed significant enough to derail the current bullish sentiment.

Meanwhile, the currency market added to the upbeat mood. The pound gained 0.5 % against the dollar, which many analysts attribute to the positive travel earnings reports and the belief that tariff tensions are likely to remain contained.

Key Takeaways

1. Travel stocks are lifting the UK market – EasyJet, IAG, Premier Inn and TUI Group all posted gains, with airlines reporting robust earnings and passenger volumes approaching pre‑COVID levels.

2. Tariff fears are muted – The proposed Chinese dairy tariff, while potentially costly for UK exporters, has not shaken investor confidence in the travel sector, largely because the travel industry is not directly exposed to dairy products.

3. Policy response is a confidence booster – The UK government’s commitment to engage with China and to explore counter‑tariffs on other sectors appears to be reassuring traders and investors alike.

4. Analysts maintain a positive outlook – Despite acknowledging the underlying risks of fuel price volatility and regulatory changes, most analysts are optimistic about the sector’s trajectory.

In a world where trade tensions can quickly ripple through global markets, the UK’s travel industry stands out as a resilient driver of growth. The day’s market movement underscores a key reality: while tariff threats are a legitimate concern, they do not appear to have yet eroded investor confidence in the travel sector’s ability to deliver earnings and support broader market gains. As the UK continues to navigate post‑pandemic recovery, travel stocks may well remain the most reliable harbingers of the nation’s economic health.