Travel firms will collapse and taxpayers will be left with a multibillion-pound bill unless UK refund rules are amended, a trade association has claimed.

Abta wants the Government to allow companies to offer credit notes as a “short-term alternative” to cash refunds because of the deluge of claims caused by the coronavirus pandemic.

Under EU law, travel companies must refund customers within 14 days if their holiday is cancelled.

But many travel firms will be unable to survive if they are forced to pay cash refunds immediately, according to Abta.

This is partly due to a delay in them receiving money back from airlines and hotels.

Countries such as France, Italy, Belgium, Spain, Germany, the Netherlands and Denmark have amended their refund rules on a temporary basis, and Abta says the UK must also take action.

Refund credit notes could be exchanged for an alternative booking or a full cash refund at a later date.

They would be financially protected, ensuring consumers’ money would be secure.

Abta warned that if the UK does not change its policy, firms will be pushed into bankruptcy, leaving the Government, which acts as the financial backer for the UK’s main Atol scheme of holiday protection, with a bill of up to £4.5 billion to refund customers.

Mark Tanzer, Abta chief executive, said: “We know the Government has a lot to manage with the current crisis, but its failure to make these temporary changes to refund rules defies logic and is leaving the consumer in no-man’s land.

“The rules around 14-day refunds were never designed for the mass cancellation of holidays, which we’re now seeing as result of Government measures to contain the pandemic.

“It’s in nobody’s interests for normally healthy, viable businesses to be pushed into bankruptcy.

“Hundreds of thousands of jobs are at risk and the UK taxpayer will have to foot the bill for customer refunds if there is an industry-wide collapse of travel businesses.

“It’s important to reiterate, this is about supporting businesses through an entirely unforeseeable and short-term cashflow crunch – customers will not lose their right to a refund, and their money is not at risk.”