Cost-benefit study reveals Heathrow runway could cost £2.2bn

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Analysis released today by the New Economics Foundation reveals that a third runway at London’s Heathrow airport may no longer be financially viable, and the costs could outweigh the benefits by £2.2bn or more.

Using the Government’s own updated value-for-money formula, the best-case scenario sees the expansion delivering only £3.3 billion of benefit, revised down from the £11.8bn cited by the independent Airports Commission in 2015. At worst, it could cost £2.2 billion, which could be borne by passengers or even government.

And that figure could be lower still. If the benefits which accrue from an increase in international-to-international passengers are stripped from the analysis, something which the Department for Transport recommends, that would mean up to a further £5.5 billion cost from building the third runway.

The new analysis, entitled Flying Low: reviewing the costs and benefits of Heathrow’s third runway, shows the economic case for expansion at Gatwick edging ahead of Heathrow, although its economic benefit to the UK would still be uncertain. The Gatwick second runway is now projected to offer a value of between £1bn and £2.4bn; rating as ‘low’ value according to the same Government formula.

Key findings from the report include:

• Using the government’s own formula for assessing the value for money of transport schemes, Heathrow expansion along proposed lines would be rated as either ‘poor’ or ‘low’ value
• Building Heathrow’s third runway will lead to lower passenger numbers at regional airports than if there were no South East expansion
• Economic modelling for the Airport Commission’s ‘strategic case’, which produced some of the big GDP benefits cited in press reports at launch, is now discredited and should not be used.

Heathrow’s expansion could hurt economies in poorer areas of the UK as passenger numbers at regional airports drop. At the same time, other benefits to the UK will be limited: By 2040, 75 per cent of new passengers would only transfer at Heathrow and neither start nor finish their journey in the UK. In addition, new connections promised for the UK may only be viable with government support. The environmental impact of Heathrow expansion remains significant.

In light of the new analysis, the New Economics Foundation is urging the Government to revise its position on Heathrow. In addition, the think tank calls for an economically sustainable approach to meeting a growing demand for flights: prioritising and incentivising cleaner travel, and making inclusive growth and shared benefits a key criteria of any new transport initiative.

Andrew Pendleton, Director of Policy and Advocacy at New Economics Foundation said:

“This report clearly shows that a new runway at Heathrow is not only bad for the environment but also poor value for money. And it threatens to further entrench the regional imbalances in our economy.

“Based on this report, we question whether the planned Parliamentary vote on the scheme this Spring should go ahead. It seems clear that Heathrow’s third runway project is no longer financially viable, and indeed the Government’s own method for appraising such projects should rule it out.

“If the vote does go ahead, we urge MPs to consider carefully the poor value for money that Heathrow now offers and whether other schemes would bring much greater benefit top passengers across the UK at much less cost.”