When the Government announced yesterday afternoon that Heathrow was its preferred option for a new airport runway, it confirmed the worst-kept secret in Westminster. After decades of conjecture and lobbying, including the publication of the Davies Report, ministers took a step towards increasing British airport capacity.
In many ways, this is more the end of the beginning rather than beginning of the end. It will still be more than a year before the Government completes a consultation on the planned expansion and it’ll be years before shovels hit soil, bulldozers start their engines and asphalt is laid. But with the announcement of the new runway, along with its plans for HS2, the Government is attempting to overhaul the country’s infrastructure – ensuring the UK remains an attractive prospect for business in the post-Brexit world.
The Government’s soundbite is that the decision signifies Britain is “open for business.” Is that really the case?
Yes – Britain’s open for business
The Government’s decision was never going to be universally popular. But set aside the contention of where the new runway is for a second. The important thing is the Government has broken with decades of procrastination and hand-wringing, and has finally moved the process on. We’re one step closer to the increase in airport capacity the UK sorely needs.
No, it’s not the end of the story – there’s still a consultation process to go through. No, airport capacity isn’t going to be increased overnight. But we’re closer to the start of construction and development, which will in itself generate jobs and investment. And this decision also needs to be seen in the context of other major infrastructure projects taking place in the UK. The construction of HS2. The extension of the tube network announced by former Chancellor George Osborne. And Crossrail. All of these project will revolutionise transport links in the UK. They will make it easier to deliver services and are a boon to business. And, importantly, it will provide employment and investment opportunities.
All of that says Britain is open for business and is taking steps to show it’s got the infrastructure in place to meet business demands. The UK remains an attractive market, even though there’s uncertainty over future trading relationships in light of Brexit. The investment opportunities and message this announcement sends will be welcomed by business as a step forward in infrastructure improvement and reinforce the fact that Britain remains an economic world leader.
Chris Rogers, Associate Director
No – homes and ‘shovel ready’ projects are the way forward
Commentators have suggested that the two decisions over airport expansion and Hinkley Point C mark the first big strategic calls of Theresa May’s government. But the pressure on May to approve these projects in the context of the referendum outcome was immense – and you have to wonder what other credible options were on the table.
Cancelling Hinkley Point would sound the death knell for EDF – one of Europe’s largest energy companies. It would also have been a diplomatic disaster for future relations with Paris and Beijing – just at the point when the UK needs an entente cordial with its international partners.
Meanwhile, further prevarication over airport capacity in the south east would have eroded confidence in the Prime Minister. The case for a second runway at Gatwick is less politically controversial, but the wider economic arguments failed to convince. Once a route to appease dissenting cabinet ministers had been found, Heathrow was the inevitable choice.
Giving these deals the green light will do little to solve immediate problems. Both projects will not become operational until 2025 at the earliest – meaning their full economic potential won’t be realised until long after the UK has left the EU.
Gloomy economic forecasts suggest more immediate action is required. In order to truly demonstrate that the UK is open for business, the Chancellor should use his upcoming Autumn Statement to relax controls on government infrastructure spending. This does not mean adopting an all-out Keynesian infrastructure programme. Instead it means focusing on smaller, ‘shovel ready’ projects where the needs case is clear – and the returns immediate.
One example would involve the State taking greater responsibility for housebuilding – an approach favoured by Sir John Armitt, Deputy Chair of the National Infrastructure Commission. The cost-benefit analysis of such a strategy is favourable – the UK requires nearly 300,000 new homes a year to meet demand, but this cannot be delivered entirely through private capital. The Government could step in to provide finance, with necessary caveats to promote affordable housing – and then sell its stake in each completed development to deliver a return for the exchequer. It is a policy borrowed from the Ed Balls playbook – but one that may be fit for purpose in 2016 Britain.