Five airport expansions at once? London’s economy is finally ready for takeoff
London’s airports are an economic success story for the whole UK. Increasing capacity is a no-brainer, writes BusinessLDN chief John Dickie
Having jetted back from Davos, the Chancellor’s warm words to global investors about the outlook for the UK economy urgently need to be matched with action.
The past months have seen growth flatline, inflation remain above target and business confidence prove fragile. And volatility in the global bond market has pushed up the government’s borrowing costs, raising questions over how it will meet its self-imposed fiscal rules.
The government’s growth mission needs to quickly secure lift off if it is going to be able to deliver its wider agenda: more money in people’s pockets, higher investment and improved public services.
Airport expansion is a no-brainer for growth
Where better to start than finally getting shovels in the ground to increase capacity at London’s airports? It seems likely that Rachel Reeves will use a speech later this week to signal her support for Gatwick’s plans to bring its northern runway into routine use and a third runway at Heathrow to underpin its unique position as Britain’s hub airport. Luton’s plans may also get the green light.
This comes after the government previously approved an increase in passenger numbers at London City Airport and supported Stansted’s £1.1bn investment programme.
To mix transport metaphors, you wait decades for one airport expansion and along come five at the same time. Taken together, these major investments will deliver jobs and growth now as the airports invest in turning their plans into a reality. They will then deliver another boost to the whole economy by supporting British business through more tourism and trade when their expansion plans are operational.
London’s airports are an economic success story for the whole UK. They support jobs and supply chains across the country and act as a gateway to the whole country’s inbound tourism. Other regional airports play an important role too but the capital is where demand is greatest, which means failing to expand here will push more visitors and business towards Schiphol, Paris or the Middle Eastern hubs – costing us jobs, taxes and growth.
Even more importantly, the international connectivity offered by London’s airports and rail is critical to the UK as an island trading nation: it enables businesses to access new markets and to create, and maintain, critical relationships with clients and suppliers in a way that is not possible through email, phone calls or virtual meetings. Research by WPI Economics for Manchester Airports Group shows UK business travel growth spend outpaced countries such as the US, France, Spain and Australia in 2023. This travel is particularly important for high growth firms in areas such as fintech and life sciences that require good global connections.
Outpacing international competition
Other countries are working hard to attract a greater share of passenger and freight traffic. Fierce international competition – combined with the fact that London’s airports are above, at or getting close to capacity – means the UK risks missing out on the growth opportunities presented by rising demand for travel and the business growth it supports.
Airports are already investing to make the most of their existing infrastructure. But these marginal gains cannot on their own deliver the step change in capacity that London and the UK needs.
The Chancellor’s support for airport expansion would help to reassure international investors that the UK is open for business by demonstrating the government is willing to take tough decisions needed to deliver its growth mission.
This should be matched with steps to ensure the UK remains an attractive place to visit and transit through – such as restoring VAT-free shopping for international visitors.
And the government needs to work closely with the industry to deliver its commitment to reach net zero by 2050 alongside meeting strict carbon, noise and air quality targets prior to expansion approval. Last year, the previous government confirmed 10 per cent of all fuel on flights taking off from the UK will need to be made up of sustainable sources by 2030. This mandate for sustainable aviation fuels will help cut emissions, but if the associated jobs and investment are to be located in the UK it needs to be matched with incentives to spur production. Establishing a price support mechanism to give producers in the UK more certainty would help to level the playing field with international rivals.
As gateways to the world, London’s airports directly and indirectly deliver huge economic benefits at a national, regional and local level. Any credible strategy for growth must allow them to operate at full throttle. Helping the aviation sector expand sustainably is essential to help our economy take off.
John Dickie is chief executive of BusinessLDN