Cautious welcome for Heathrow expansion

The freight and logistics sector broadly welcomed the news today that the government has agreed to expand air capacity at Heathrow.

The scheme to build a new runway at Heathrow – the first full length runway in the south-east since the second world war – will now be taken forward in the form of a draft ‘National policy statement’ for consultation next year.

Transport Secretary Chris Grayling said: "A new runway at Heathrow will improve connectivity in the UK itself and crucially boost our connections with the rest of the world, supporting exports, trade and job opportunities. This isn’t just a great deal for business, it’s a great deal for passengers who will also benefit from access to more airlines, destinations and flights."

Expansion at the airport will better connect the UK to long haul destinations across the globe and to growing world markets including in Asia and South America, bringing a significant boost to trade.

Heathrow already handles more freight by value than all other UK airports combined, accounting for 31% of the UK's non-EU trade, and its expansion will create more opportunities for UK businesses to get their goods to new markets.

The decision to increase capacity at Heathrow is “the right choice for the UK economy, the freight industry and the nation”, said the Freight Transport Association (FTA). 

FTA has run a campaign highlighting the vital importance of air freight to the UK economy and why a decision backing the Airports Commission recommendation for a third runway is essential for UK importers and exporters who rely on the expansion of Heathrow. About 40% of UK imports and exports by value are dependent on air freight and the wide range of services provided by Heathrow to access overseas markets.

Chris Welsh, FTA Director of Global and European Policy, said: “This is excellent news for the freight and logistics industry and the country. This decision is even more vital in a post-Brexit world where Britain’s capability to expand its trade and ability to compete in markets outside Europe is heavily dependent on connectivity to emerging markets.”

“Freight and passenger services have a strong synergy at Heathrow. It is the wide diversity of destinations and services which makes it such an attractive proposition for those shipping cargo.  Airlines accepting freight in the belly hold of passenger planes can often make the difference between services being profitable or not,” he said.

Mr Welsh added: “Following the referendum vote to leave the EU, this decision is even more crucial to the UK’s position as a leading global trading nation.  In line with the Prime Minister’s Conservative Party Conference speech in which she talked about the Government’s vision of ‘a truly global Britain’, we need to look to markets outside Europe, in particular to emerging markets in Asia, South America and the Indian subcontinent.  Freight accounts for around 40 per cent of the UK’s imports and exports by value, and high-end manufacturing industries such as pharmaceuticals, automotive manufacturing, mobile telephones and retail are dependent on Heathrow.

“So much economic activity relies upon air freight across the UK - it is critical to economic recovery that the nation can demonstrate it is open for business with a smooth and reliable journey from our international gateways.”

The trade association that represents the UK’s freight forwarding and logistics businesses gave a more a cautious welcome. Robert Keen, Director General of the British International Freight Association, said: “Today’s news appears to be the beginning of the end of years of procrastination over the expansion of UK aviation capacity.

“If that is the case, it is long overdue good news for our 1,500 member companies who have been dismayed over the ongoing delay on such a huge issue.

“However, we understand that a public consultation will now be held on the effects of airport expansion before the government makes a final decision as part of a national policy statement on aviation, with MPs then voting on that decision in the winter of 2017-18.

“If that is the case, uncertainties remain. Whilst the UK Transport Secretary, Chris Grayling, has hinted at an expedited planning procedure, with no reopening of high level arguments, the inevitable legal challenges and the convoluted parliamentary and planning processes that are also likely lead me to doubt that any expansion will be completed by the time that UK aviation capacity is predicted to run out in 2025.

“I hope I am proved wrong, but I won’t be booking a ticket for the opening ceremony just yet."

Fully supporting the government’s decision, Alexandre de Juniac, the International Air Transport Association’s Director General and CEO, said the new runway “needs to have the right price tag”.

He explained: “To maximise the potential of the new capacity, Heathrow costs must become even more competitive and cost effective. The government's desire to keep charges close to current levels cannot be compromised. In fact, the aim should be much more ambitious given the already high costs of doing business at Heathrow.

"A key component must be a close scrutiny of all costs associated with the new capacity, and how these are allocated to different stakeholders. For instance, the government should take separate responsibility for all surface access funding, for both road and rail.

“We are convinced that the new runway will be environmentally sustainable and look forward to a dialogue with stakeholders on how this can be achieved. But the new runway must not be so encumbered with draconian operational restrictions and costs on its use that its potential economic value is destroyed. That would short-change travellers and the UK economy.

“The next step needs a big community effort. Airlines, the airport, the regulator and the government must work very hard together to ensure the success of the new runway. Above all, that means keeping costs at competitive levels.”

Tim Alderslade, Chief Executive of the British Air Transport Association, said: "We welcome this long overdue announcement – and agree with the Government's decision that additional capacity at Heathrow offers greater potential economic and social advantages than expansion at Gatwick. Tough discussions now have to be had by all parties – and our airline members will be closely involved in these next stages of preparatory work. The needs of passengers, cargo customers and local communities must be met.

"Our members are clear that the cost of expansion that they and their customers pay for is key and we will be scrutinising this decision and future, more detailed, plans. Heathrow is the most expensive hub airport in the world – and airports are not funded by the taxpayer, but by passengers. Therefore any new infrastructure must be cost effective. We must ensure that it is affordable and that the price paid by customers does not increase. Today's passengers must not pay for capacity that will not be operational until the mid-2020s. In short, we need the right solution at the right price, at the right time, in order to meet the needs of customers."

Stoke-on-Trent South MP Rob Flello, a member of the Transport Select Committee and chair of the All Party Parliamentary Group on Freight, said that in reality the decision is a smack in the face for the thousands who have lost their jobs in industries such as the steel sector.  “The Prime Minister’s claim to want to ‘use the power of the state to build a fairer Britain’ is clearly a lie” he said.

Flello said it was right for Mrs May to stop dithering about how to enlarge the country’s air capacity.  “However,” he continued, “once again the lives and livelihoods of ordinary people are ignored while selective big business is showered with government support, in this case to the tune of £9 billion pounds.”

Flello said he has no problem with the decision to choose Heathrow for expansion if that is the right one for the country. He said what has angered him is that, “another Tory government is preparing to throw huge amounts of cash at what might turn out to be a highly profitable project for a private company, Heathrow Airport Holdings Ltd, which is primarily owned by Spanish, Qatari, Canadian, Singaporean and Chinese investors.  Does anyone really think there would be such a clamour for more capacity if big business didn’t stand to make huge amounts from it?  I have no problem with that. We want our companies to be successful.  The question is, why does the taxpayer, including those steelworkers facing the destruction of their industry, have to pay for it?”

The MP is concerned that the third runway might come far too late to be the commercial success its supporters claim. Management at Gatwick have said they will still press ahead with plans to build a second runway. Flello said: “Extensive work needs to be carried out on the M25 before anything can be done at Heathrow meaning that Gatwick could already be up and running with its expansion long before the third Heathrow runway is complete. Carriers will already be established at Gatwick and might not feel the need to switch. The question needs to be asked whether there would still be the market potential to make the Heathrow expansion worthwhile.”

Flello is also concerned that the £9 billon pound figure will end up being far from all taxpayers will have to find to pay for the work. “Under the Barnett formula, such a big chunk of state aid in England will have the knock-on effect of raising the amounts due to Scotland, Wales and Northern Ireland. The government just hasn’t thought it through. A few months ago they were shying away from infrastructure spending under the guise of austerity. Today they’re committing to the equivalent of paying for dozens of new hospitals and schools for a commercial development which might not even be needed. A warped sense of priorities is one thing but throwing public money at something of such questionable value is nothing less than irresponsible.”