Britain is losing out on vital trade with emerging markets due to “inaction and policy errors” over airport expansion, the Institute of Directors has warned as it backed extra runways at both Heathrow and Gatwick. The IoD argues one but preferably two extra runways should be added at Heathrow, the UK’s only hub airport.
Heathrow should be expanded to four runways to prevent the UK from slipping further behind rival countries in Europe, which are better connected to key growth markets in Asia and Latin America, according to a report from IoD. The lobby group, which is one of the first major business organisations to openly back a four-runway hub at Heathrow, is also pushing for expansion at Gatwick to meet demand from passengers in the South East over the next three decades.
But it warns a second runway at Gatwick or any other London airport would be “insufficient” on its own to solve Britain’s looming aviation crisis.
In a 104-page report aimed at the Davies Commission on aviation, the IoD also argues for an independent study into the damage inflicted on the wider economy by “exorbitant” Air Passenger Duty (APD). Britain has the highest aviation taxes in the world and the IoD suggests APD could be costing the country as much as £12bn a year by deterring visitors, while it raises just £2.6bn for the Treasury’s coffers. Tuesday’s report will put the business group, which has 38,000 members, on a collision course with Mayor of London Boris Johnson, who has commissioned a £3m study into a four-runway hub either in the Thames Estuary or at Stansted.
Corin Taylor, senior economic adviser at the IoD and author of the report, said expansion at Stansted, which currently only has one runway, “would risk being a very poor investment” given its location and the fact that it is currently only about half full. A Thames Estuary airport could only be financed if Heathrow was shut down, Mr Taylor added.
According to the Government’s own figures, London and the South East are facing an aviation capacity shortfall of 16m in 2030 and 57m in 2040. The IoD argues most of the increased demand will be for flights from Heathrow.
“Only a new hub airport or a four-runway Heathrow are sufficient to meet the shortfall,” the report says. “A combination of a third runway at Heathrow and a second runway at Gatwick or Stansted would be sufficient to meet the overall capacity shortfall, but may not provide enough additional hub capacity.”
The IoD accuses successive governments of handing business to rival airports in Europe by dodging decisions on runway expansion, hiking APD and imposing “unwelcoming” visa and border systems.
Since 1990, the number of destinations served by Heathrow, which currently has two runways, has dropped by a fifth to 180. This compares to the 313 destinations served by Amsterdam Schipol airport and 250 cities reached from both Frankfurt and Paris Charles de Gaulle.
The UK is particularly poorly connected to Asia and Latin America, the IoD says, even though it is estimated emerging markets will account for 70pc of global GDP by 2050. Studies show British trade is 20 times higher with countries served by direct flights.