Book with an operator and get the whole Atol cover by paying extra or take the risk
Sadly this is generally the case. In Ontario, Canada, travel agents etc. are covered by TICO which covers most issues like a resort going bankrupt before you go. I don't know that they would in this case as the operator has simply decided that they don't want to run the trip which they advertised, and (if the OP is being truthful, and I can't imagine he isn't) there is nothing in the booking contract that gives them the right to simply cancel a trip. I'll give them credit for at least being honest about it. They could have simply lied and said that the boat had sunk, or had had a fire or something.
This is further complicated by the fact that the OP is in the UK. If he was in the US, I'd suggest having a lawyer write a polite letter saying that you intend to pursue legal action to cover the cost of the trip, the airfare and a penalty to cover the "lost vacation". I agree that the vacation is unique, so it isn't easy to simply substitute. It's not like Holiday Inn cancelling your reservation but you can simply cross the street to the competitor. Legal action would likely cost more than the loss.
So my guess is that these guys are probably b*ggered and should do as others have suggested... find the next best trip and chalk it up to experience.
When we travel, we also choose to book direct, but we will only do so with reputable operations which we believe to be sound. We have an upcoming trip with a bit of an unknown operation in Belize, but the deposit was minimal so if they close before we get there, we can presumably scramble to find another place and cut our losses. I doubt this place would pay travel agent commissions anyway.
I feel for this OP. We all look forward to these special trips and when they fall through, almost at the last minute, it sucks.
Personally, I'd have no issue naming the operation and shaming them publicly, but I suppose there could be consequences to that too...