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Shares in Thomas Cook have fallen sharply after the travel firm reported a drop in earnings at its UK business.

Earnings at its UK division fell by 40% in the year to 30 September to £52m and the company's share price sank by as much as 13% in early trade.

Rising hotel prices, the fall in the pound and competition in the Spanish market all affected the holiday firm.

Its costs rose because of a spate of fraudulent illness claims and helping customers caught up in Hurricane Irma.

Despite the weak performance at its UK division, underlying earnings across the Thomas Cook group as a whole rose by £24m to £330m, helped by a recovery at its German airline Condor.

Chief executive Peter Fankhauser promised to arrest the slide in the UK: "While conditions are challenging in the UK, we have implemented a set of actions to improve performance."

The company said it planned to take legal action against people who make false illness claims.

Thomas Cook is also focusing on destinations such as Turkey and Egypt as they begin to regain popularity. Demand for holidays in both countries had fallen after terror attacks.

The company said trading for the winter season was meeting expectations, with bookings up 5% thanks to steady demand for trips to the Canaries and a "strong recovery" in holidays to Egypt.