Economic benefit of Heathrow expansion slashed by 90 per cent
Heathrow’s third runway could boost the UK economy by just 0.05 per cent, a 90 per cent loss of the economic benefit that had been previously forecast.
The expansion of the UK’s biggest airport will boost GDP by 0.05 per cent at best but this impact could be as little as 0.3 per cent, government analysis has found.
Heathrow had previously promised that its expansion would deliver a 0.5 per cent economic boost – ten times that which is now expected.
The airport says it is nearing capacity and has claimed that a third runway is essential to enable the UK’s economic potential.
Responding to the Department for Transport’s publication of a draft policy backing the project, Heathrow’s chief executive Thomas Woldbye urged the government to go faster to back the expansion.
“The UK cannot realise its full economic potential without an expanded Heathrow,” he said.
Heathrow hits back at downgrade
The airport has criticised the government’s “very narrow” analysis of the project’s boost to GDP, claiming that it fails to take into account major factors like rising cargo trade and underestimated passenger number growth.
Heathrow pointed to a 2015 government review which they claim “consistently found that our Heathrow expansion plans will grow the economy and benefit every part of the UK”.
A spokesperson for the airport said that the government’s economic assessment is “extremely limited” and designed for publicly funded projects.
“It doesn’t capture any value from increased trade, inbound tourism or massive private investment into UK supply chains, businesses and steel producers. It’s not fit for purpose and needs to be reformed to capture these clear benefits,” they said.
But opponents of Heathrow’s expansion have seized upon details of the government’s analysis, claiming that the social and environmental impacts of the project now outweigh its economic benefit.
Alex Chapman, head of economic policy at progressive think tank the New Economics Foundation, said: “The results from the department’s impact assessment seriously undermine the government’s case for expansion.”
Business leaders, however, have welcomed the government’s launch of a consultation on Heathrow’s expansion, which they say would deliver a major boost to the economy.
Heathrow’s plan ‘only viable option’
John Dickie, chief executive of industry body Business LDN, said: “Building a third runway at Heathrow is vital to the UK’s competitiveness as an island trading nation, so it’s positive to see the Government taking the next steps towards making the project a reality.”
The business group backed Heathrow’s proposal for the project, which Dickie said is “the only viable option for delivery”.
“Our expansion plans are widely supported by businesses and trade unions across the UK because they understand the transformative difference this project will make with improved prosperity and new job opportunities for their communities,” Heathrow’s spokesperson added.
Heathrow’s plans for the expansion have come under threat in recent months after the aviation regulator said it could allow rival firms to bid to build the third runway.
Heathrow West, led by hotel tycoon Surinder Arora, has tabled a proposal for the project which he says will cost £23bn, less than Heathrow’s own £33bn plans.
The government’s planning documents opened the door to this bid by finding that a phased construction of the mega-project might be necessary given its “scale, complexity and delivery timeframe”.
Last week, Heathrow hit out at the regulator, the Civil Aviation Authority (CAA), claiming that the airport’s own proposal is the only viable option.
The CAA is weighing up imposing tighter controls on Heathrow’s spending. This would risk “taking the UK backwards and weakening our competitiveness,” Woldbye said.
A spokesperson for the Department for Transport said: “Net present value is just one part of the overall picture – crucially, an expanded Heathrow could support over 60,000 new local jobs and deliver £40bn of benefits to the UK.
“This will attract international investment and strengthen Britain’s connectivity, and we have been clear that expansion will be financed by the private sector.”