As the rhetoric around diversifying the economy and ending our reliance on financial services ramps up, we need to remember that the ability to trade goods and services relies on being physically able to exchange them. Aviation is the only mode of transportation that can facilitate this exchange in a short timeframe.
Frontier Economics recently looked into the impact of poor aviation links on the UK economy. Its research showed that the UK is in danger of missing out on £14bn worth of trade from emerging markets, due to inadequate aviation links. This is equivalent to the profit made by HSBC in 2011.
This trend is corroborated by a British Chamber of Commerce study which revealed that two-thirds of business leaders in Brazil, China, India, South Korea and Mexico are more likely to trade with France, Germany or the Netherlands rather than the UK, as they currently offer a greater number of direct flights to their market.
Later this month the government is expected to publish its draft framework for sustainable aviation which will examine all the options available to London and the rest of the UK. The onus on the government will be to design a framework that allows aviation to be a conduit to the growth of our industry. London acts as the gateway to and from the UK for international commerce and if we are to shield the economy from further damage we must ensure that it is seen by the rest of the world as “open for business”.
The list of potential options open to the capital is somewhat limited. Boris Island is an imaginative idea and one must commend the vision of those behind it, but the £50bn cost and 20 year timeframe to develop means that it is not the silver bullet that some might like to claim.
Another recently mooted idea was to link Heathrow and Gatwick by the supposed Heathwick train line. However, while this is a quicker and cheaper proposal than Boris Island it creates no additional capacity for London as a whole. Furthermore, if a passenger is faced with the option of using Frankfurt or Paris Charles de Gaulle as a European hub or flying into Heathrow, transferring to Gatwick by train and then flying on from there, it is pretty much a no-brainer. London loses every time. Interconnectivity between the two neither solves the problem of capacity, nor makes London a more desirable international hub.
Policy makers have explored numerous solutions. However, now is the time to accept that the only sensible and realistic option is to press ahead with the previous government’s plans to build a third runway at Heathrow. The arguments are well researched and well founded. Heathrow offers a solution that can be delivered within a reasonable timeframe and cost. A third runway will increase capacity at the airport, enabling it to reduce congestion and, contrary to popular opinion, will offer the flexibility required to then minimise noise pollution and associated carbon emissions.
February’s figures from the Office of National Statistics underlined another reason why expansion at Heathrow should come back on the agenda. The statistics showed that the rate of unemployment was 8.4 per cent of the economically active population, an increase of 0.1 on the previous quarter. Yet it is estimated that around 20,000 jobs are currently provided by the wider Heathrow community, not to mention the vast number of people who are employed by multinational companies who choose to locate in its vicinity; the M4 has become a high-tech hub precisely because of its proximity to Heathrow, while the number of international businesses who have located to the Chiswick Business Park speaks for itself.
As David Cameron wrote recently, Britain is suffering from a severe “infrastructure deficit”. In recent months the transport debate has been dominated by investment in our highways and in High Speed 2 (HS2). Worryingly, some commentators see this as an alternative to allowing our aviation sector to grow. We are deluded if we think HS2 will help our prospects at developing links with emerging economies.
George Osborne frequently discusses the need to have a plan for growth, but this is being undermined by the infrastructure deficit that the Prime Minister speaks of. The government was due to publish its aviation framework in March, but the chancellor announced in his Budget that this would be delayed until the summer. If his plan is to be credible then it must provide a roadmap that will enable the aviation industry to help UK companies fight for business in a highly competitive global market. If we don’t take this opportunity, our rivals certainly will.
Paul Willis is head of aviation at EC Harris.