- Independent report shows constrained runway capacity in the South East will affect the whole of the UK economy
- Passengers could be saddled with higher travel costs or a reduced choice of destinations
- Restricting capacity in the South East is unlikely to promote growth in the regions
New research published today by leading economists, FTI Consulting, claims that the ‘do nothing’ approach to runway capacity expansion in the South East “will stifle UK growth” and could result in lost benefits of up to £47 billion over the next 30 to 50 years.
The independent report, ‘A study on the importance of aviation infrastructure to sustainable UK economic growth,’ makes clear that the UK needs to have the potential to connect with emerging markets and warns that “if there is no spare capacity…the UK could be left behind other European countries that have much more capacity.”
The report also says that “the notion that ‘rebalancing the economy’ will occur by stifling investment in the South East is misguided and potentially damaging.” The report argues that because the South East is the ‘engine of the UK, stifling its growth will stifle UK growth.’
It is the view of the economists who undertook the research that “policy makers should reconsider the current stance of no expansion and the safeguarding plans outlined for seven UK airports in the 2003 White Paper.”
Stewart Wingate, Gatwick Airport Chief Executive said: “The report is a timely reminder of the important role aviation plays in supporting economic growth and recovery.
“There is a growing consensus amongst the industry that capacity in the South East is an issue. This is supported by the report which notes the conclusion from the DfT’s own projections that airport capacity at Gatwick and across the South East will fill up by 2030.
“Today, Gatwick operates at 78% capacity so there is room for more flights and we believe we will grow to carry 40 million passengers a year by 2020 with our single runway and two terminals. But Heathrow is already operating at 99% capacity.
“The Government must decide how the capacity issue in the South East is to be addressed but it is clear from the report that if we ignore the need for more capacity in the London airports system, the whole UK economy will suffer.
“It also suggests that passengers will suffer with weakened connections to the rest of the world. Passengers will have to contend with higher costs of travel coupled with a reduction in the choice of travel destinations.
“We support the view expressed in the report that the future aviation policy should review safeguarding plans outlined for the seven UK airports in the 2003 White Paper. We will continue to safeguard land in partnership with local authorities in the event that if Gatwick needs a new runway it would be possible to build one. We have no current plans to do so and are committed to upholding the legal agreement which prohibits the construction of an additional runway before 2019 but the requirement on airports to safeguard land must be upheld.”
Vicky Pryce, Senior Managing Director at FTI Consulting, who led the research and says: “This report demonstrates that aviation infrastructure is important for the sustainable growth of the UK, in particular in connecting the UK with emerging markets. Decisions on whether or not to expand capacity involve a range of considerations, including some such as environmental effects that were not considered by this report. However, our report demonstrates that there is an economic cost that needs to be given serious and appropriate consideration. “
Mr Yosuke Kawakami, Japanese Embassy, was interviewed as part of the research and, speaking in his personal capacity, said “I hope the UK government will re-consider the hold on capacity expansion – it is a real threat to the UK. New business may be turned away and some already here may move out.”
Gatwick Airport included this economic research as part of its submission to the Government's 'Sustainable Aviation Policy Framework' scoping document to help inform the future aviation policy.
To see the full report click here:
Principal conclusions of the FTI Consulting report
- There are observable aviation capacity constraints today in the South East; it is clear that capacity needs to increase to facilitate the predicted increase in demand for air travel.
- The ‘do nothing’ scenario of not allowing capacity expansion in the South East will have detrimental effects on the UK economy by constraining demand, adding time costs and environmental costs (from continually increasing congestion) and capping the potential wide-ranging catalytic effects that aviation provides.
- Possible responses to the increased congestion are higher prices or a reduced choice of destinations and frequency; if capacity is not increased, leisure and business travellers will suffer a welfare loss.
- Estimates of the economic impact of this ‘do nothing’ scenario clearly depend on what the counterfactual is. Estimates reported suggest the lost benefits range from around £20 billion to £47 billion in net present value terms over periods of 30 to 50 years.
- At the prudent, lower end of the range, this equates to an estimated 15,000 jobs p.a. that could be lost by not increasing capacity in the South East as the UK misses opportunities and existing jobs are gradually terminated due to airlines relocating to European hubs who can meet business demands.
- There is a disconnect between government growth objectives and its aviation policy stance: the government is encouraging infrastructure investment, increased exports and tourism yet has cancelled further investment in aviation capacity; investment that would be private sector led.
- It is important to have adequate capacity in the right location to serve the various user needs; this includes both hub and point-to-point airports – they are complementary.
- Stakeholders consulted stressed the importance of aviation investment, particularly in the South East, to meet their business needs. The notion that “rebalancing of the economy” will occur by stifling investment in the South East is misguided and potentially damaging; the South East is the engine of the UK; stifling its growth will stifle UK growth.
- The UK needs to have the potential to connect with emerging markets. If there is no spare capacity both to add to connections and to increase the frequency of connections, the UK could be left behind other European countries that have much more capacity.
- We ask, what has changed materially since the 2003 White Paper? In our view policy makers should reconsider the current stance of no expansion and the safeguarding plans outlined for seven UK airports in the 2003 White Paper.