Britain will miss out on more than £100 billion over the next two decades if the Government ignores London’s “shocking” airport crisis, ministers were warned today.
Failure to build more runways to link the capital with the world’s rising economic powers will wreak huge damage on the country’s already stretched finances, according to new analysis.
The report, originally commissioned by Heathrow owner BAA, is the most in-depth on the subject so far. It comes amid growing alarm that London could become “cut off” from countries such as China and Brazil.
The Standard has learned Chinese passenger jet manufacturer COMAC decided to locate its European base in Paris, not London, because of superior links at Charles de Gaulle airport.
David Cameron and George Osborne are under pressure to sort out the issue. On Thursday, a group of Conservative MPs will publish a book, The Growth Factory, on the need for an industrial strategy, devoting a chapter to the danger of leaving aviation as it is. And a senior economist warned: “if you don’t have the capacity, you’re stuffed.”
The detail of the report, by consultancy Oxford Economics, has emerged as the Government prepares a consultation on aviation policy. The study concludes British economic growth will lag far behind its full potential if no new runways are built, and there will be “a substantial economic impact in both the long and medium terms.” This “GDP gap” would reach £8.5 billion a year by 2021, it is claimed.
And even if the gap gets no worse in the 2020s, the cumulative loss of national income by 2028 would top £100 billion, the study predicts. That is twice the estimated £50 billion cost of building a new airport in the Thames estuary, and more than 10 times the bill for a new runway at Heathrow.
It would also mean the Government losing out on about £38 billion of tax revenues, enough for some 150 general hospitals or a dozen aircraft carriers.
Report author Andy Logan, senior economist at Oxford Economics, said: “I anticipate the gap will widen as other centres are able to build capacity and we are not able to — or choose not to — and we continue to lose competitiveness.” Other experts said the study may even underestimate the problem.
Oliver Hogan, managing economist at the Centre for Economics and Business Research, said: “It is a shocking state of affairs and nobody seems to be taking it seriously. It will be extremely costly to the London economy because we don’t have the capacity to open links to the emerging destinations, and without those links business will decide to locate elsewhere in Europe.
“It’s very, very important this is sorted out. The fact is that if you don’t have the capacity you’re stuffed. If you don’t build the capacity you are just cutting off your nose to spite your face. It is very hard to do anything meaningful at Heathrow — half a runway at best — so the long-term solution has to be a new airport.” The Coalition cancelled the third runway in one of its first acts after the general election, and said it “would refuse permission for additional runways at Gatwick and Stansted.”
But in his Budget, Chancellor George Osborne said Britain “must confront the lack of airport capacity in the South-East”, in what was seen as a significant shift in government thinking.
Heathrow is currently 99 per cent full, with no prospect of opening new long-haul routes to the exploding “super-cities” of China and the dynamic Latin American “jaguar economies”.
The Oxford Economics report says the £8.5 billion annual loss of GDP from not expanding airport capacity would comprise £4.5 billion from lost investment, £3.6 billion from lost tourism, and £410 million from lost trade.
Why is there an aviation crisis in London?
Business leaders say the UK economy, and London in particular, is crying out for better links to the fast-growing regions of the world — particularly China, Russia, India and South America. Without them the British economy will be stuck in the slow lane.
Why can’t we put that right?
Heathrow’s five terminals and two runways handle 70 million passengers a year and it has been full to bursting for at least a decade, according to its chief executive Colin Matthews. It is next to impossible for airlines from developing countries to start new routes, so instead they go to Paris, Frankfurt, Amsterdam or Madrid.
But what about Gatwick, Stansted and Luton?
They all have spare capacity but are not popular with business travellers. They also find it hard to support new long-haul routes as they are not hubs where people make connections.
Is Heathrow still “fit for purpose?”
London’s hub is showing its age. Its owner BAA is spending £1 billion and it has raised its game, but compared with rivals such as the new Hong Kong International Airport it feels tired and difficult to navigate.
Are the two-hour queues at Heathrow’s immigration halls part of the problem?
Not directly. The long delays are caused by a shortage of passport control staff and new security rules.