Heathrow's third runway: will it boost growth?

British Airways Boeing 787 overflying terraced houses on approach to Heathrow. Photo: Nicolas Economou/NurPhoto via Getty Images — Chancellor Rachel Reeves has confirmed the government would back Heathrow Airport's third runway.

(Image credit: Getty Images)

What's happening with Heathrow's third runway?

The decades-old proposal to increase Heathrow airport’s capacity by building a third runway might finally actually happen. Chancellor Rachel Reeves confirmed on Wednesday the rumours that the government would back the project, as well as announcing other plans for boosting growth. Reeves said Britain could not afford to “duck” such difficult decisions. Heathrow “connects to emerging markets all over the world, opening up new opportunities for growth”, she said, adding that a third runway would make the UK “the world’s best-connected place to do business”. Notably, she failed to confirm expansion proposals at Gatwick and Luton.

Haven't we heard this before?

Many times. The debate about Heathrow’s expansion can be traced back to the Roskill Commission, set up in 1968 to identify a site for a new airport for London (that was never built), and recent decades have seen a semi-permanent stream of studies, commissions, white papers and legal wrangling. Detailed plans for a third runway were first proposed by Heathrow in 2003, winning cautious approval from the Blair government. Expansion got full government backing in 2009, under Brown, before the Cameron government first scrapped the plan (in 2010), then re-embraced it (2012), splitting the coalition. Under Theresa May (2018), the Commons voted in favour, and a third runway was once again official government policy. In 2020, the Court of Appeal blocked expansion as incompatible with the UK’s emissions-cutting commitments, before the Supreme Court overruled them. By then, however, the Covid pandemic had hit the aviation sector, and the whole question became moot.

What are the politics this time?

Not straightforward. Many in the Labour party are opposed. Energy secretary Ed Miliband is a long-term opponent and has struck a markedly different tone from Reeves in recent weeks. Reeves told a Davos audience that projects should not be blocked because they “might add something to carbon emissions in 20 years’ time”. Days later Miliband assured a Commons committee that the expansion of Heathrow and other airports “won’t go ahead” if they don’t meet the UK’s emissions targets (of net zero by 2050). London mayor Sadiq Khan is also strongly opposed (as is Manchester’s Andy Burnham). Independent advisers on the government’s Climate Change Committee (CCC) have called for no net airport expansion without a detailed plan to curb emissions from the aviation sector and manage passenger capacity. It’s due to publish its next carbon budget – setting out legally binding limits for UK net emissions of greenhouse gases from 2038 to 2042 – on 26 February. Reeves might be keen, but there’s no reason to think the politics will be any smoother this time round.

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Does Heathrow Airport still want a third runway?

Absolutely. The airport’s CEO, Thomas Woldbye, thanked the government and chancellor for their leadership and hailed their “bold, responsible vision”. The government’s goal is to secure planning permission by the end of this parliament, a target Woldbye called “ambitious, but not undoable”. He said the airport would submit detailed proposals to Whitehall by the summer and that if everything went to plan the earliest completion date would be the mid-2030s. Some industry analysts think it will take eight to ten years just to get through planning and completion is unlikely before 2040.

Will we ever see a third runway at Heathrow?

There’s no way of knowing how the political and legal wrangling will play out. But what can be foreseen, says the Financial Times, are the potentially even greater obstacles relating to cost and the scale of construction. Pre-pandemic, the plan was for a multi-billion-pound megaproject that would include diverting the M25 into a tunnel under the new runway and demolishing 750 homes and a primary school. Some analysts say it’s an open question whether the UK has the construction skills and workforce capacity to deliver a project of that size, especially if competing with official plans to build 1.5 million homes, plus more transport and water infrastructure, data centres and gigafactories. Separately, there are battles ahead over financing – and to what extent the government is prepared to relax the relatively onerous framework that governs Heathrow’s “regulated asset base” model. The current expansion plans were costed at £14 billion in 2014, and would now be far higher. Heathrow has quietly told airlines that the bill for expansion would be between £42 billion and £63 billion, according to industry sources. That makes its privately financed expansion a bigger punt than ever.

Would a third runway at Heathrow boost growth?

Reeves cited a study by Frontier Economics suggesting a third runway would raise GDP by 0.43% by 2050 and create 100,000 jobs – not nothing, but hardly a game-changer. The UK needs more air capacity. And there are promising emerging technologies, including hydrogen power, electrification and synthetic fuels, which could cut carbon emissions, even as aviation expands. But a bigger Heathrow isn’t the answer, says Liam Halligan in The Telegraph.

Why wouldn't a third runway at Heathrow boost growth?

“It is madness to further develop an already enormous airport smack in the middle of a suburban landscape that is home to millions, involving the mind-bending costs of diverting the M25 and demolishing countless homes,” says Halligan. The case for Heathrow hinges on securing “hub” status, helping consolidate London as a global business capital. Yet, for over 80% of in-bound passengers, London is the final destination. Far better would be to expand Gatwick and Stansted, and spread more of the UK’s capacity to regional airports ripe for expansion – including East Midlands, Manchester and Glasgow. Expanding Heathrow, which would take at least a decade, will do next to nothing for growth. “What that requires instead is a lower tax burden, smarter regulation and the political courage to let the UK economy fly.”