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A Third Runway at Heathrow Would Add £30 Billion to UK Economy, Says New Study

[ 13-07-2009 ]

- Each year the runway is delayed costs the country £1bn 

- An expanded hub airport to generate significant gain for Scotland 
- Scotland loses £20m each year Heathrow is not expanded 
Building a third runway at Heathrow would add £30 billion to the UK economy, according to a new study published today by the British Chambers of Commerce (BCC).
The report entitled Economic Impacts of Hub Airports, forecasts that building a third runway at the airport would deliver between £8.6bn and £12.8bn in increased productivity, and approximately £20bn in wider economic benefits, such as higher levels of employment. Some 60% of this benefit is predicted to be outside London and the South East.
The study shows that £600m of this wider economic gain would benefit Scotland.  Scotland loses £20m each year Heathrow is not expanded.
The research, which was conducted by leading economics and transport consultancy Colin Buchanan on behalf of the BCC, reveals that each year the building of a third runway is delayed the country loses between £900m and £1.1bn.
By reducing delays and increasing the frequency of flights, a third runway would save business passengers time and increase their productivity. Passengers would also benefit from flights to new destinations, removing the need to wait for transfers at airports outside the UK.
The wider economic benefits include direct and indirect increases in employment and gains to London as an international business location adding to its ability to recruit highly skilled people from around the world.
The £20bn of wider economic benefits over 60 years compares with the £3.8bn forecast to arise from the High Speed 1 rail line (the Eurostar line) and the £10bn estimated for high speed rail (High Speed 2) from London to the North of England and Scotland. The extra runway at Heathrow would be privately funded while rail projects are publicly funded.
The study highlights the extent to which Heathrow’s shortage of capacity is leading it to fall behind Continental competitors, such as Schiphol and Frankfurt. Over the last 20 years, Heathrow has fallen from being the leading airport in Europe by destinations served to fifth place.
Meanwhile, the number of UK regional cities it serves has fallen from 21 to six, with the result that UK passengers are now effectively subsidising hubs in Continental Europe. The airport has also been left behind by its rivals in serving the growing BRIC economies of Brazil, Russia, India and China.
The report notes that a key benefit of a hub airport is that it can sustain a large network of routes with far lower levels of traffic than would be needed to support a point to point network of similar size. Heathrow’s transfer passengers mean that UK residents and businesses have access to more direct destinations, more frequent flights and lower fares.
Commenting, David Frost, Director General of the British Chambers of Commerce, said:
“This comprehensive study clearly outlines the economic benefits of expanding Heathrow – an important part of the debate which too few people fully understand.
“Connectivity is vital to the UK economy as businesses seek to develop new global opportunities that will allow them to generate wealth and jobs. Without additional capacity at our major hub airport, we will continue to fall behind our Continental competitors.
“The age old phrase ‘time is money’ is apt as we look for solutions going forward. We must invest now to safeguard our economic future or we risk wasting £30 billion fumbling around for an alternative.”
Liz Cameron, Chief Executive of Scottish Chambers of Commerce, said:
“This report underlines the importance of Heathrow Airport to the Scottish economy and reinforces the reasons why Scottish Chambers of Commerce have continued to support the campaign for the further expansion of Heathrow, in conjunction with the development of a High Speed Rail link between Scotland and London.  Politicians of all parties must recognise the cost of any further delays to essential investment in our transport infrastructure.
“Scotland’s future prosperity is closely linked with the need for us to develop strong, affordable and accessible transport links with the rest of the world.  That means more direct international air services and access to a world-class hub airport at Heathrow.”
Richard Lambert, CBI Director General, said:
“We support the creation of a third runway at Heathrow, which will increase capacity, and is important for the long-term future of the UK economy. We therefore welcome this contribution to the debate, which sets out the economic benefits for the country.”
Brendan Barber, TUC General Secretary, said:
“This is an important report. By making clear the business benefits of airport expansion it backs up the TUC’s view that, within very strict environmental limits that are rigorously scrutinised and enforced, it can help safeguard jobs and the UK economy. Doing nothing is not an option. Without a third runway, the UK will fall further behind our competitors, losing jobs to the bigger and more robust hub airports elsewhere in Europe.”
Tony Woodley, General Secretary, Unite the Union, said:
“My members welcome this report.  An expanded Heathrow operating within very strict environmental limits is vital if we are to safeguard jobs in the UK and ensure we continue to compete and trade with the rest of the world – particularly the new emerging market of Brazil, China, India and Russia.  Today we stand at a crossroads where we can take the difficult decision and expand Heathrow and compete or not expand and begin the slow decline of steadily losing destinations served by Heathrow and the jobs that are associated with them. This reports clearly flags up the cost of not expanding Heathrow and estimates it to be about £1bn per year. To recover from the biggest banking crisis since the 1930s we can ill afford not to expand Heathrow.”
Miles Templeman, Director General, Institute of Directors (IoD), said:
“Based in an island trading nation, UK businesses understand that a world class hub airport, with connections to all parts of the globe (not just holiday destinations) is vital for our future prosperity.  Heathrow expansion is an emotive issue, but it is important that the pros and cons – including its environmental impact - are discussed properly and rationally.  This report makes an interesting and valuable contribution to that debate.  The figures speak for themselves.  The key question for me is can we afford the cost of £1bn per year of not building a third runway at Heathrow?”
Colin Stanbridge, Chief Executive of the London Chamber of Commerce and Industry (LCCI), said:
“The London Chamber of Commerce and Industry welcomes this authoritative new report. A reliable, world class, global hub airport, with connections to all parts of the globe is vital if we are to maintain London’s lead in financial and business services.  This report makes the business case even more compelling for a third runway at Heathrow as soon as possible.”