Travel, leisure and transport stocks were some of the biggest decliners in the market on Monday after a new variant of the coronavirus in the South East of England forced the UK government to introduce fresh lockdown measures.
Shares recovered slightly during the day but still ended firmly in the red. IAG and Rolls closed 8% and 3% lower, respectively.
On Saturday, UK prime minister Boris Johnson introduced a fourth tier of coronavirus restrictions in London, the South East and East of England, as well as unveiling tighter plans around households gathering during Christmas.
The new measures meant the closure of non-essential shops, gyms and hair salons, which had remained open under previous restrictions. Residents in tier 4 areas were also banned from travelling outside of their region and travelling abroad.
The spread of the new strain of the virus is thought to be up to 70% more transmissible.
Watch: UK stocks and pound tumble as Europe shuts borders
Analysts at Bernstein said: “European airlines, amid a very bleak last quarter of the year, had been hoping for travel to pick up during the holiday season and initial booking data seemed to confirm this hope which would have provided some additional cash flow.
“However, with more lockdowns coming into force day by day and now the potential proliferation of a UK travel ban there is a very real risk that instead of relief the Christmas period will not aid airlines’ cash balances.”
A raft of countries have since banned travel from the UK, with Germany, Italy, the Netherlands, Austria, Belgium and Israel, first announcing a travel ban on Sunday.
Several nations quickly followed suit. More than 40 countries in total have imposed travel bans on the UK, some for at least 48 hours while leaders come up with a plan for stemming the spread, some until the end of January. France also stopped freight transport via the Channel Tunnel.
It came as the World Health Organisation (WHO) warned its European members to increase measures to prevent the spread of the new COVID-19 variant.
It said that outside Britain, nine cases of the new strain have been reported in Denmark, as well as one case in the Netherlands and another in Australia.
Johnson will chair an emergency response meeting on Monday to discuss international travel and the flow of freight in and out of Britain.
A Number 10 spokesperson said: “The Prime Minister will chair a COBRA meeting to discuss the situation regarding international travel, in particular the steady flow of freight into and out of the UK.”
At the start of the year travel stocks had already suffered from turbulence caused by the coronavirus pandemic. Figures from November revealed that the International Air Transport Association (IATA) expects a net loss of $118.5bn (£87.6bn) in 2020, a deeper rescission of its $84.3bn forecast in June.
A net loss of $38.7bn is also expected in 2021, more than double the projected $15.8bn loss six months ago. These travel curbs could worsen those losses.
Naeem Aslam, chief market analyst at Avatrade, said investors around the world were concerned about the new strain of COVID-19 discovered in the UK.
“Investors are paying more attention to the short-term deterioration in the coronavirus situation and forgetting that we have a coronavirus vaccine, which will have much positive influence on the upcoming quarter’s economic data,” he said.
According to government figures there have been a total of nearly two million confirmed cases of coronavirus in the UK and more than 65,000 people have died.
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