Home Business Insights & Advice What would an expanded Heathrow mean for London Businesses?

What would an expanded Heathrow mean for London Businesses?

by Sarah Dunsby
14th Dec 23 12:17 pm

Nothing has been finalised nearly eight years after the Heathrow Airport Commission’s recommendation to construct a third runway. The pandemic halted procedures; however, negotiations persist, and although most businesses have reacted favourably to the idea, what would the implications of an expansion entail for the commercial landscape of London?

Ministers have indicated that the private sector will determine the trajectory of Heathrow Airport’s expansion.

Transport Minister Jesse Norman informed the House of Commons that Parliament continued to “in principle” support the construction of a third runway at the West London airport despite the postponement caused by legal challenges and the Covid-19 pandemic.

However, he added that Heathrow must now present its plans and funding.

While the Heathrow expansion has previously received cross-party support in Parliament, there have been concerns raised by Members of Parliament (MPs) whose constituencies are near the airport.

Despite concerns, the question remains: could an expanded Heathrow benefit London businesses?

The local economy

Increased connectivity is required to keep up with the rise in cross-border transfers of products, services, and people, propelled by globalisation and technological innovation. According to proponents of the expansion, a third runway will boost economic development in the United Kingdom by connecting the country to expanding global markets, thereby facilitating greater access to traders for British businesses. While the third runway will be advantageous for business in the United Kingdom, it will also provide passengers with a wider selection of airlines and destinations. Consequently, competition will increase, which may result in reduced airfare.

Although most of the analysis has been preoccupied with the United Kingdom’s increased business openness and connectivity, numerous economists neglect to mention the multiplier effect this will exert on the local community and the United Kingdom.

The UK government asserts that the connectivity provided by Heathrow enables London and the South East to effectively compete with other European cities for business investment, thereby contributing to the UK’s overall economic growth.

Although Heathrow is the only airport in the world to accommodate more flights on its two runways, there is concern that connectivity will suffer with only two runways, given that they currently operate at approximately 99% capacity. Operating at such a high capacity increases the likelihood of flight disruption-related delays, which could result in rival European airports acquiring passengers at Heathrow’s expense. It is contended that London is prone to lagging behind its European counterparts. Advocates of a third runway contend that its construction would enhance Heathrow’s connectivity and enable the airport to withstand any flight disruptions, thereby generating economic benefits amounting to billions of pounds from now until 2080.

Business connectivity

The United Kingdom is engaged in an international competition for employment, commerce, and economic expansion. International business heavily relies on the connectivity that global gateway airports provide. Twenty times as much commerce occurs between the United Kingdom and emerging market countries that have direct daily flights as opposed to those that do not.

Additionally, 85% of UKTI clients reported that exporting facilitated development that would have been unattainable otherwise. According to projections, development markets such as China, India, and Brazil will account for approximately 46% of the global GDP by 2050.

Heathrow aims to ensure that the expansion benefits the entirety of the United Kingdom, which would ultimately range throughout a wide scale of industries, such as the casino sector for example. Flourishing ideas like no deposit bonus strategies for playing customers are created through the expanding online teams behind them; with more jobs and customers arriving at brick-and-mortar establishments, the benefits for this sector and many more are endless.

The jobs

With a specific emphasis on the multiplier effects that arise directly from the expansion of Heathrow Airport, the expenditure cycle resulting from the third runway is anticipated to enhance local employment and prosperity significantly. For instance, one estimate suggests the creation of an additional 77,000 local jobs, with the implementation of a further 5,000 apprenticeships by 2030.

Furthermore, the design and construction of the expansion is projected to generate an additional 60,000 jobs. London’s continuously growing population would greatly benefit from these employment prospects, given that several local authority areas surrounding Heathrow have been grappling with persistently high unemployment rates. This implies that the creation of additional employment opportunities due to the expansion would substantially enhance the overall employment landscape in the region. Other employment opportunities will arise due to heightened flight volumes, including a demand for additional pilots and crew, cargo handlers, and airport personnel to staff newly established check-in stations and recreational facilities. Demand for conveyance connections to the new location will also increase.

Business profits and the bottom line

The evident multiplier consequences of the job growth in West London is apparent. New disposable income results from the difference between newly earned incomes and the average savings rate. This disposable income stimulates demand for goods and services, ultimately increasing business profits. This will result in an upsurge in tax revenue for the government through an increase in income tax and duties on consumer expenditure. This may potentially facilitate the government’s ability to finance initiatives such as poverty reduction, healthcare expansion, and educational standard improvement.

In addition, this employment expansion may increase the demand for housing in the area, necessitating the development of additional community infrastructure; consequently, this may increase the demand for construction and planning. Upon contemplation of the multiplier effect, it becomes evident that the expansion of Heathrow will yield substantial economic advantages for the surrounding region, in addition to exerting far-reaching impacts on the United Kingdom as a whole by facilitating enhanced connectivity to emerging markets.

 

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