Optics over outcomes: How the Chancellor’s airport expansion plans don’t add up

What would it take for the government to breach the advice of its climate advisors? How big does the reward need to be for us to damage our international credibility on the climate crisis?

Not very big at all, would seem to be the answer based on today’s movements.

The claimed economic benefits of full-throttle airport expansion are minimal at best, at worst, they are actively unhelpful.

To understand why, we have to go back to basics. Air travel can interact with the economy in a range of different ways but in the UK it isn’t that complicated. Despite significant growth in overall passenger numbers in recent years, business use of air travel hasn’t seen net growth in almost two decades, neither has the weight of air freight moved (Figure 1). This is awkward, because research commissioned by the DfT has identified growth in this passenger group as critical to the delivery of wider growth benefits. Leisure travel is the only game in town. 

Figure 1: Air freight (tonnes) per year and business passengers moved through UK airports

Source: Civil Aviation Authority and ONS Travelpac

Of the 70-odd million additional passengers the proposed expansions of Heathrow, Gatwick, and Luton would put in the air at their peak, we can expect between two-thirds and three-quarters (or 45 – 50 million) to be UK residents on their way out of the country. Making air travel cheaper while the cost of domestic leisure, hospitality, and overland travel remains prohibitively high leaves many squeezed households with little choice. Between 25 – 50% of travellers report ​‘cost’ as a key factor in their decision whether to stay in the UK or travel abroad.

The absence of VAT or fuel duty on air travel have further stacked the odds in favour of flying and the consequences are stark. Over the decade leading up to the pandemic the share of household annual expenditure that went on travel abroad almost doubled. This stripped spending away from high streets and domestic tourism, both of which were in decline (a drag on growth, as it happens). The primary losers in this exchange are regions outside London and the southeast. Immediately following the pandemic, domestic tourism actually saw a boom bringing new spending to corners of the UK long neglected. Excited by this potential (and aligned with its ​“levelling up” agenda) the last government’s 2021 Tourism Strategy targeted sustaining this trend in the long-term.

Those ambitions are now long-gone.

From a high point in 2022, the UK’s domestic tourism industry has now seen two years of decline, contributing to the very stagnation that troubles the Chancellor. At the same time UK residents have poured overseas in record numbers, taking their hard-earned cash with them. New NEF analysis suggests trips to Mediterranean resort destinations and the Canary Islands hit a new record in 2024. Our top 20 direct routes saw passenger numbers rise from their 2019 peak of 52 million to 56 million last year.

The last line of economic defence of the proposed expansion of Heathrow is perhaps the weakest of them all. Many desire to increase Heathrow’s standing as a hub airport, this means capturing ​”international to international” passengers changing flights in the UK. As these passengers stop in the UK for a matter of a few hours at most they leave little economic value behind. They also pay no air passenger duty so the benefit to the Treasury is minimal. Their flights do, however, come under the UK’s climate responsibilities. Transfer passengers are a boon for the airports and airlines, and the predominantly foreign-domiciled entities which own them, but of little value to the rest of us.

Today’s airport decisions hint of desperation from a government seemingly more interested in optics for a select group of wealthy international investors than actual improvements in economic outcomes for communities all across the UK.

Image: iStock