Heathrow report: Lack of airport capacity costs UK £14bn

Heathrow chief executive Colin Matthews: "It is time to look at the options, although none are easy."

Related Stories

A lack of capacity at Heathrow is costing the UK economy £14bn a year in lost trade, according to a report commissioned by the airport.

That figure could rise to £26bn a year by 2030, the report said.

Heathrow bosses are keen to see a third runway built at the west London airport, but the government has ruled it out for the time being.

The government has asked a commission headed by Sir Howard Davies to advise on future UK airport capacity needs.

The Davies Commission is expected to present an interim report to the government by the end of 2013, with a full report due in the summer of 2015 - after the next general election.

Heathrow's report, "One hub or none", was prepared for the airport by consultants Frontier Economics. It was commissioned to inform Heathrow's response to the Davies Commission but is not its formal submission.

Analysis

I've just looked back through my notes from the start of the year.

"Dead and buried" was the phrase a senior person at the DfT used to describe to me a third runway at Heathrow. Just a few months after that Justine Greening, the Transport Secretary at the time, effectively told me that she was against the idea.

What a difference a few months and some expensive lobbying makes. Justine Greening has been unceremoniously shunted out of the way and the idea is now firmly back on the table. It's also backed by some big hitters across the business world, unions, aviation bosses and many politicians.

But don't let that fool you into thinking the diggers will move in any time soon, if ever.

First, there's the rabid opposition it would face from the likes of London Mayor Boris Johnson, the Lib Dems and the hundreds of thousands of Londoners who'd be affected by the noise.

Second, Sir Howard Davies might not actually recommend it when he reports back in 2015, and even if he does, the next government will have to back it. If it clears all those hurdles, Heathrow's owners then say it will take at least eight years to get planning permission and finally build the thing.

Hub airports bring passengers from other airports so they can transfer onto flights to their final destination. About one third of passengers flying into Heathrow transfer onto other flights.

The report said that the choice for the UK was not between two hubs or one, but one hub or none.

'Out of sync'

It said only one airport could operate as a hub in the UK and said the government could either do nothing and "let the UK fall behind competitors", add additional capacity at Heathrow, or close Heathrow and replace it with a new larger hub airport.

Heathrow chief executive Colin Matthews said: "If anyone was still in doubt about the importance of aviation to the UK economy, today's report should lay those doubts to rest.

"The new work we are publishing today shows that only a single hub airport can meet the UK's connectivity needs and the choice is therefore between adding capacity at Heathrow or closing Heathrow and replacing it with a new UK hub airport."

He told the BBC: "Transfer traffic is the mechanism that makes routes economically viable. If you could not offer the feed, a lot of routes would not be possible."

However, critics said the report lacked credibility. Joss Garman, political director of Greenpeace, said: "This completely biased report from the owners of Heathrow is out of sync with other more independent reports on London's connectivity, and it simply recycles the aviation lobby's tired and discredited arguments.

"The case for a third runway has never been weaker, and it's time the aviation industry woke up to the reality that Heathrow expansion will never happen because it would be political, economic and environmental madness."

He pointed out that the report referred to Heathrow falling behind Paris and Frankfurt on flights to mainland China, but if you included Hong Kong, then London had more flights to China than any other European rival.

Start Quote

The Airports Commission needs to look to the future and not to Heathrow's monopoly past”

End Quote Gatwick Airport statement

The report looked at the number of connections and passengers that there would be if there was unconstrained capacity at the UK's hub airport and compares this with the number of passengers that there would be without any new runway capacity.

It then calculated the level of trade that is being missed out on because of that connectivity gap.

But John Stewart, chair of the campaign group Hacan, said there was no evidence that London's economy would lose out if Heathrow did not expand as a hub.

"The reason for this is London's importance as a destination to business people," he said.

"Heathrow has the largest number of terminating passengers of any airport in the world. It therefore does not need the extra passengers an expanded hub would bring to make it commercially viable to operate lots of flights to key business destinations."

Noise restrictions

On Tuesday, London Mayor Boris Johnson met Sir Howard, stating his opposition to a third runway at Heathrow, and putting forward the case for a Thames estuary airport.

The all-party 2M Group, which represents more than 20 councils close to Heathrow, has said it will tell the Davies Commission that loosening restrictions on Heathrow's existing runways would destroy the quality of life for people living near the flight path.

A Department for Transport spokeswoman said that the UK was one of the best connected countries in the world, and maintaining its airport network was vital to the economy.

"The strength with which the different options for achieving this are put forward shows precisely why we were right to set up a proper independent review with the timescale to consider fully what is in the country's interest," she said.

A report by the Policy Exchange think tank last month supported replacing Heathrow's existing runways with four new ones immediately to the west of the current site as the best option for increasing airport capacity in the UK.

It also advocated much tighter restrictions on operating hours, permitted aircraft type and the steepness of take-off and descent, in order to reduce noise pollution over London from current levels.

Other options to expanding Heathrow include building a second runway at Gatwick or Stansted, expanding Luton, or replacing Heathrow with an airport in the Thames Estuary, as favoured by Mr Johnson.

Gatwick Airport responded to Heathrow's report by saying: "A new runway at Gatwick could be more affordable and practical than other options and give passengers a greater choice of routes to key destinations. Critically, we would have a significantly lower environmental impact compared to an expanded Heathrow.

"The Airports Commission needs to look to the future and not to Heathrow's monopoly past. It will need to decide whether a competitive airports' network in London, delivering more passenger choice, connections, convenience and lower prices, is more preferable to propping up an outdated and unnecessary expanded Heathrow."

More on This Story

Related Stories

The BBC is not responsible for the content of external Internet sites

More Business stories

RSS

BBC Business Live

  1.  
    HEADLINES
    • UK manufacturing growth slows
    • Fund manager abandons HSBC over fines
    • Mortgage approvals fall in UK
     
  2.  
    UK MANUFACTURING 09:56:

    The UK's manufacturing industry grew at the slowest rate in 14 months in August, following a drop in new orders. The Manufacturing Purchasing Managers' Index, or PMI, fell to 52.5, the lowest since June last year. A reading above 50 indicates growth.

     
  3.  
    WOODFORD ABANDONS HSBC 09:39:
    HSBC

    Neil Woodford, one of the UK's most well-known fund managers, has sold his stake in HSBC. "I am worried that the ongoing investigation into the historic manipulation of Libor and foreign exchange markets could expose HSBC to significant financial penalties," he said on his website. Mr Woodford had 2.68% of his fund's assets invested in HSBC, a package worth £64m at the time of sale.

     
  4.  
    UK MORTGAGES 09:33:

    The Bank of England says British mortgage approvals fell slightly in July compared with the previous month, to 66,569. In January, the measure reached 76,000, but has been wavering as the housing market shows some signs of cooling.

     
  5.  
    MARKET REPORT 09:26:

    The major European stock markets have had a muted start this morning.

    • The FTSE 100 is down 0.12% at 6811.88
    • The Dax is up 0.02% at 9472.17
    • The Cac 40 is down 0.12% at 4375.75

    BAE Systems is the biggest winner in London, up almost 3%, while Morrison Supermarkets has dropped 2.25%.

     
  6.  
    ISLAND FLING 09:11:
    Apia

    Some conferences are more appealing than others. The third UN Conference on Small Island Developing States begins in Apia, Samoa today. Some 50 countries are invited, and the agenda covers a wide-range of topics, including sustainable energy, water and sanitation, and biodiversity.

     
  7.  
    Via Twitter Jamie McGeever, chief markets correspondent for Europe, Reuters

    tweets: "Italian manufacturing sector contracts for first time in over a year. PMI falls to 49.8 in Aug from 51.9 in July, expected 50.8."

     
  8.  
    PERFORM BUYOUT 08:50:

    Perform Group, which owns the Omnisport sport news agency, rose 26% to 256.7 pence in London after Access Industries Group said it would buy the company. It already owns 42.5%.

     
  9.  
    SAMSUNG EXPANDS 08:35:
    Samsung

    South Korean giant Samsung Group is to become even bigger, Bloomberg reports, after merging its shipbuilding and engineering units. Shares in both firms rose as a result of the announcement.

     
  10.  
    ECUADOR'S BITCOIN 08:19:

    Ecuador says its new digital currency will begin circulating in December. The electronic money will be the first backed by a central bank, and will work alongside the country's current currency - the US dollar. The president says it will help poorer people gain access to banking.

     
  11.  
    MICROSOFT ULTIMATUM 08:06:
    Microsoft China

    The clock is ticking for Microsoft in China. Competition authorities have given the firm 20 days to reply to questions over the compatibility of some of its software, Reuters reports. Microsoft is one of several foreign companies that have come under scrutiny in the country in recent weeks.

     
  12.  
    PUTIN SEEKS PARTITION 07:51:
    Putin

    The Financial Times leads with Vladimir Putin's call for talks on "statehood" for south-east Ukraine. The paper calls it a provocative comment, which will heighten fears that Moscow is seeking partition for Ukraine. The Daily Telegraph says David Cameron and Barack Obama are to respond to the Russian president by urging NATO allies to increase defence spending. In a leader article the paper also recommends fresh sanctions.

     
  13.  
    BERKELEY PERFORMANCE 07:37:

    Berkeley Group, the home builder, is having its annual meeting today. The firm is "well positioned to continue to invest in the business and deliver returns to shareholders. Earnings this year are anticipated to be in line with current market expectations," chairman Tony Pidgley will say.

     
  14.  
    KIER CONTRACT 07:23:

    Kier Group, the builder, says it is the preferred bidder to design and build a new £50m residential tower in London. The company says it will "design and construct 224 luxury apartments arranged in four blocks".

     
  15.  
    GOING SOUTH 07:11:
    St Andrews

    The Guardian reports that Scotland's top universities are bracing themselves for a "brain drain" of their most talented scientists if there's a "yes" vote for independence. The paper says senior figures believe Scotland's best known universities would lose access to billions of pounds of funding - the subjects most at risk are said to include advanced computing and genetic research. However a source close to the Scottish government says the concerns are misplaced and research funding will be maintained.

     
  16.  
    CUBAN IMPORTS 06:57:

    New rules are coming into force in Cuba, limiting the amount of goods people can take into the country in their luggage. For example, Cubans will be allowed only 10 kilos of detergent rather than 40, 24 bras rather than 48, and just two flat screen televisions. Many Cubans see the new restrictions as throttling one of the few sources of high-quality consumer goods.

     
  17.  
    RAC LISTING 06:47: Radio 5 live
    RAC rescue vehicle

    Holly Cook, of Morningstar, was on 5 live too, talking about the car breakdown specialists RAC, who are said to be considering a stock market flotation. How come? It shows "more confidence in the market" and may be seen as a good investment as its business is easily understood, she says.

     
  18.  
    FINANCE LITERACY 06:41: Radio 5 live

    Tracey Bleakley adds that the first rule of money management is "knowing the difference between something you need and something you want." Think about that in the lunch queue.

     
  19.  
    FINANCE LITERACY 06:35: Radio 5 live
    Classroom

    Tracey Bleakley, chief executive of the Personal Finance Education Group is talking about the government's new plan to provide education on financial planning. "We've all got to talk about it," she says, adding that children could educate their parents. That way people can see through "the marketing" that lots of debt is a good idea.

     
  20.  
    TESCO PERFORMANCE 06:30: Radio 5 live

    Tesco is struggling to compete with the likes of Aldi and Lidl because the smaller supermarkets stock fewer lines and focus on keeping prices low. "Tesco are giving people far too many reasons to go elsewhere," Steve Dresser, retail analyst, tells Wake up to Money.

     
  21.  
    TESCO'S NEXT MOVE 06:27: BBC Radio 4

    Tesco's new boss, Dave Lewis, starts work today at the beleaguered supermarket chain, and Holly Cook, of the investment site Morningstar, tells Today that his first move may be to slash prices. Tesco, she says, "used to be a value proposition," but is now "not that much cheaper" than its rivals.

     
  22.  
    EU REVOLT 06:20:
    Cameron

    In its main front page story, the Independent says David Cameron is facing a damaging new revolt over Europe. It says up to 100 Conservative MPs are planning to defy him by declaring that they'll vote to leave the EU - regardless of what concessions he wins for Britain.

     
  23.  
    NETWORK RAIL 06:17: Radio 5 live

    Philip Haigh, railway writer, is still on Wake up to Money. Why is Network Rail in £33bn of debt? It's been spending lots of late, he says. Railway stations, for example, have never looked better. "You just have to look at King's Cross and see what they've done there," he says.

     
  24.  
    BORIS TAKES OFF 06:14:

    Boris's comments come as we await news on whether the Airports Commission will put his favoured plan for a Thames estuary airport back onto its shortlist of options. Incidentally, Mr Johnson is seeking nomination as the Conservative parliamentary candidate in Uxbridge and South Ruislip - where Heathrow expansion is widely opposed.

     
  25.  
    BORIS TAKES OFF 06:07:
    Plane over Heathrow

    The Telegraph carries a piece by the Mayor of London, Boris Johnson, in which he warns that expanding Heathrow, and ditching his plan for a new airport in the Thames estuary, would be a "disaster". But Mr Johnson, who has previously called for the closure of Heathrow, now suggests it could remain open as a secondary airport.

     
  26.  
    NETWORK RAIL 06:03: Radio 5 live

    Philip Haigh, railway writer, is on Wake up to Money, talking about Network Rail's move to the government's balance sheet. On the one hand, he says, it means the state-owned company can borrow more cheaply from the government, but the government will also be able to appoint directors and intervene in things like executive pay.

     
  27.  
    06:01: Howard Mustoe Business reporter

    Morning! Get in touch via email bizlivepage@bbc.co.uk or via Twitter @BBCBusiness

     
  28.  
    06:00: Joe Miller Business Reporter

    Good morning. It's a good day for current account holders - particularly those who have experienced the maddening misfortune of being charged for going overdrawn by a few pennies. Banks will now have to give customers until 2pm to cover funds before slapping on a levy. Stay tuned for reaction to that news, and the rest of the business headlines.

     

Features

  • Polish and British flags alongside British roadsideWar debt

    Does the UK still feel a sense of obligation towards Poles?


  • Alana Saarinen at pianoMum Dad and Mum

    The girl who has three biological parents


  • Islamic State fighters parade in Raqqa, Syria (30 June 2014)Who backs IS?

    Where Islamic State finds support to become a formidable force


  • Spanish volunteer Rafa Munoz Perez practising with a rifle in Donetsk, 7 August Motley crew

    The Europeans who pitch up in Ukraine to join the fight


From BBC Capital

Programmes

  • Volcanic eruptionThe Travel Show Watch

    Uncovering the secrets of the Icelandic island buried by a volcanic eruption

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.