Heathrow Expansion: Britain's Runway to Growth
SUMMARY
The UK could be the world’s leading aviation hub. Heathrow is one of our greatest national assets. But it is being held back, with consequences for UK growth: the airport is arguably the most capacity-constrained transport hub in the world.
The new Labour government recognises the economic opportunity of expanding Heathrow, and has set out four tests. Expansion should be (1) compatible with the UK’s climate change commitments, (2) not worsen local noise pollution, (3) not worsen air pollution, and (4) provide economic benefit to all parts of the UK.
These tests can be met, but only if conditions are attached to expansion. The government should not delay in clarifying its conditions and should consider introducing a hybrid bill to Parliament to fast-track expansion.
Even with unabated airport expansion, the UK is on track to have the lowest per capita emissions of any major economy by 2030. Extra emissions could be mitigated by switching just 0.9% of the UK’s petrol cars to electric vehicles each year.
UK aviation can hit net zero by 2050 through a combination of fleet upgrades, sustainable aviation fuel (SAF), nature based carbon sequestration, carbon capture and storage (CCS) and other carbon offsets.
There are several options for addressing noise and air pollution, such as by enabling greater restrictions on night time flights and reducing the number of early morning and late evening flights. Heathrow could also ban or financially penalise the noisiest engines, and redraw landing routes.
Heathrow could continue to improve local air quality by electrifying its ground operations, incentivising its airlines to transition towards less polluting engines, improving indoor air filtration and building new rail capacity to reduce road journeys.
Heathrow expansion offers economic opportunities for all parts of the UK. It would be entirely privately funded, and would raise money for taxpayers. Although the immediate services-based benefits are concentrated in London and the south of England, the benefits to industry and manufacturing are disproportionately felt in other parts of the UK. Furthermore, tax revenues can be used to fund regional road, rail and air infrastructure across the UK. Finally, air passengers across the UK will benefit from lower fares, saving £160 for an average family of four flying on holiday.
CHALLENGE & OPPORTUNITY
The World’s Favourite Airport
The UK could be the aviation hub of the world. Indeed, until recently, it was. From the 1970s to the 2010s, London Heathrow was the unrivalled centre of global travel, consistently accounting for more international passenger traffic than any other airport.
It is only in the last decade that other rivals have begun to challenge Heathrow’s status. Since 2014, Dubai has topped the table, and other European hubs like Paris Charles de Gaulle and Amsterdam Schiphol are nipping at Heathrow’s heels.
Figure 1: Annual international passengers, selected airports 2013-2023
Heathrow suffered a larger drop in international passenger traffic during the Covid pandemic, compared to other hubs, but has also seen a more significant rebound. However other European airports are closer to challenging Heathrow’s dominance compared to in 2013, and Dubai has overtaken Heathrow to the top spot.
This loss of leadership is entirely self-inflicted. British policymakers on both sides of the political spectrum repeatedly dithered on the decision to expand Heathrow’s capacity in line with demand. Heathrow is severely constrained by its two runways. Among the other top 10 airports for passenger traffic, the average number of runways per airport is 4.9.
Only one other top 10 airport – Dubai – is limited to two runways. But unlike Heathrow, Dubai does not restrict flights during the night. This means it can operate 24/7, giving it effectively twice the capacity of Heathrow. Furthermore, the UAE has another major international hub airport, Abu Dhabi, and is expanding Dubai World Central (DWC), which aspires to be the world’s largest airport.
Heathrow’s most immediate European competitors all have multiple times more runways: Amsterdam Schiphol has 6, Paris Charles de Gaulle and Frankfurt each have 4, and Istanbul has 5. Heathrow is by far the most congested major hub, with one take off or landing every minute, per runway, during daytime hours. For comparison, Amsterdam Schiphol has a similar number of take-offs and landings at peak times, but can spread these between six runways, rather than two.
Even with expanded capacity, the UK’s per capita emissions are projected to remain lower than the countries where other hub airports are located. While France is expected to remain relatively low in emissions, it is expected to exceed UK per capita emissions, while Germany and the Netherlands are projected to have significantly higher per capita emissions by 2030, at 5.4 and 4.6 tonnes respectively. Heathrow is operating at capacity, struggling to meet demand, and faces severe competition from rivals. This is not just an issue for national pride, but has a tangible impact on Britain’s prosperity, both now and for the next generation.
Air transport directly accounts for £3.26bn of UK GDP, with employment at Heathrow airport accounting for £2.8bn of gross value added (based on Heathrow and ONS wage figures). However, these figures significantly understate the economic contribution of air travel to the UK economy, whether through services in the immediate vicinity of the airport or wider inbound tourism, which accounted for £31.1bn of spending in 2023, or 1.1% of GDP. Heathrow is the UK’s largest port: according to its own figures, “the value of the goods processed through Heathrow is greater than Felixstowe, Southampton, and the Dover Eurotunnel combined”.
Heathrow expansion is estimated to grow direct employment at the airport by 28.6 thousand people to over 100 thousand. That would mean Heathrow would account for an additional £1bn in GVA annually through wages alone. That excludes all the potential benefits from higher passenger numbers through Heathrow, which would support additional economic activity, both in the immediate vicinity, and through indirect channels, such as:
- Companies choose to base their European headquarters in the UK, over e.g. Paris, Frankfurt or Amsterdam.
- Major international conferences and events are organised in London rather than international rivals.
- Trade and cargo is routed through London rather than rivals, reducing costs for UK consumers and supporting the wider logistics sector.
- University students may be more likely to choose to study in the UK if there are more direct routes, supporting the large (but struggling) £130bn UK university sector.
- Increased services exports due to fewer barriers and lower costs to international travel - specifically Mode 4 services.
- The UK can foster the future of sustainable aviation, from sustainable aviation fuel (SAF) to the most efficient engine and aircraft design. The UK has set ambitious proposals for 22% SAF by 2040, and is already leading the way in SAF design and deployment. Heathrow expansion could provide a market for innovation.
- The UK has a larger demand base for aerospace development, which has further benefits for national security.
- Our supply chains are more resilient: even during Covid, when most planes were grounded, the UK relied on Heathrow for importing PPE and vaccine supplies. Having a globally connected airport can add supply chain flexibility and option value for businesses.
But none of this is guaranteed. Heathrow’s hub status depends on its position relative to international rivals, particularly those in Europe. Heathrow already has the world’s most expensive landing slots, and there is evidence of this damaging its competitiveness with other airports.