THE ongoing travel chaos caused by an erupting volcano in Iceland is costing the Devon economy millions of pounds, according to business leaders.

The ban on all flights in and out of the country, imposed as a volcanic ash cloud passed over the UK, has led to growing frustration for both holidaymakers and business travellers.

Exeter Airport was deserted yesterday as all flights were cancelled.

Devon and Cornwall Business Council chairman Tim Jones estimated the economic impact on the two counties so far at up to £8million.

The figure is expected to rise to £10million after Transport Secretary Lord Adonis said the ash cloud was expected to cause 'significant disruption' to air services over the weekend.

This cost included lost revenue due to inbound travellers not arriving, disruption to business travel and meetings and delayed contracts.

Mr Jones said: "Clearly we have had another full working day of impact and lost business connected to that, so the cost is quite quickly moving up the scale. Fine weather was a stimulus and bookings have been healthy at the upper market end of the hotel range, but they have had cancellations."

Lost business included a delegation of French businessmen and women hosted by the Business Council who had been staying in Exeter.

The group from Brittany and Normandy had been due to fly home today, but went home early by ferry instead, meaning a dinner planned for last night was cancelled.

Derek Phillips, chairman of Exeter Chamber of Commerce and secretary of the Exeter and Heart of Devon Hotels Association, was due to fly to Manchester yesterday but had to drive instead.

He said local hotels had not reported a surge in bookings from travellers stranded at Exeter Airport because its regional catchment area meant most could return home.

"The two firms most affected are Flybe and the airport," said Mr Phillips. "They will obviously lose revenue. For business travellers it's inconvenient but I think most people accept it's a very extraordinary circumstance and are waiting to see what happens, or are making alternative arrangements.

"If it went on for a long time we would be worried, but hopefully it will be back to normal next week."

Julien Wilkinson, general manager at the Abode Exeter hotel in Cathedral Yard, said: "We've had a few cancellations, which is unfortunate, but nothing too drastic. We've lost a couple of room bookings and about six dinner reservations for next week from people who would have been flying into Exeter from Spain.

"If this continues, it's going to get worse, but we'll have to wait and see what happens.

"The leisure trade this weekend has certainly picked up, with very late bookings. Possibly people intending to finish off the holidays by going away have decided to have a bit of luxury in the UK instead."

Exeter Airport spokesman Stephen Ayres said: "At the moment, we're just saying there will be a substantial hit on revenue but we're well used to dealing with unusual events.

"We're flexible and our staff are flexible, but we still have to assess what the impact will be. We have to look at how many staff were on duty unnecessarily and everything else.

"It affects all the areas: car parking, businesses, coffee shops, spending in duty free. It's not just the loss of people going through the airport."

City-based airline Flybe was due to operate 16 flights in and out of Exeter yesterday and 548 in total, but the only one to fly left Belfast for Glasgow at 7pm.

Spokesman Niall Duffy said: "We can cope with the situation. When the weather hit, we were spending £1million extra on de-icing fluid and were still not getting up in the air. We're in a similar situation now but we don't have that extra cost and all our aircraft are in the right place, so we aren't having to fly empty planes.

"It's still manageable and very marginal. There's going to be a cost issue with refunding people who aren't going to re-book because they were going to a wedding or a meeting, but we're a £600million-a-year business and this impact will be small. We're a big business and we can cope with it."

Rob Hitchings, managing director of Exeter-based Nomadic Travel, said his company was helping customers whose trips had been cancelled or who were stranded overseas.

"We had six people on Thursday whose trips had to be cancelled. They'll probably reschedule for later in the year or the same time next year.

"We have another five who are due to travel tomorrow and Monday who may be in the same situation, but we're hoping they might get away.

"We also have about 13 people due back over the weekend from places like Hong Kong, Egypt and Thailand who are either held up or may be held up.

"Although some of these people feel incredibly frustrated, at least they can understand these measures haven't been taken on a whim and there's a big safety issue here."

Meanwhile, rail companies have experienced much higher demand. A spokesman for Cross Country Trains said: "We're happy to have been able to help many of the thousands of people left stranded by the airlines since Thursday morning. Our trains have been very busy, including from Exeter after Flybe cancelled all its flights to the North East and Scotland, and we trust everyone enjoyed their journey by train."

A spokesman for First Great Western said it was not able to lay on extra carriages or trains between Exeter and London and it was too early to tell if there had been a surge in bookings.