BUSINESS NEWS economic case for a third runway at Heathrow last week. Ian Taylor reports


‘Forecast growth in business travel demand wrong’


The case for expanding Heathrow to cater to increased demand for business travel needs revising, according to Dr Alex Chapman, senior economist at the New Economics Foundation (NEF). He told the Transport Select


Committee: “We’ve heard a lot about business travel. [But] there is a fundamental problem. “In the last 20 years, there has


been about 25% real-terms growth in [UK] GDP and not a single additional business passenger through our airports. There has been no growth in the [business travel] market since 2006.” He argued: “As of 2024,


Dr Alex Chapman


Committee explores benefit of Heathrow growth across the UK


business passengers are down about 20% on the pre-Covid level. Twenty years without growth suggests a structural shift in the passenger base. We need to be cautious about assuming demand for the next 20 years.” Chapman told MPs: “There is


a clear trajectory. It looks like the forecasts of business passengers are fundamentally wrong.” He noted forecasts based


on 2011 figures “anticipated significant growth in business travellers by 2030” and said: “At the moment we’re way below that.”


The Transport Select Committee hearing sought to examine the links between airport expansion and “economic growth across the UK”. This followed the announcement


last month of government support for Heathrow expansion which quoted research suggesting “60% of the economic boost from a third runway would be felt outside London and the southeast”. Some of the evidence to the


committee challenged that forecast. Former Iata chief economist


Brian Pearce explained the benefit of a hub airport like Heathrow when asked why there weren’t more direct flights to destinations from regional airports, saying: “On


many routes, there aren’t enough passengers [for direct flights].” But asked what benefit


there would be to passengers from Edinburgh connecting via Heathrow rather than Amsterdam or Paris, Pearce acknowledged: “The majority of benefits would come in the region of London.” Independent economic


consultant Marc Postle suggested increased capacity at Heathrow would not automatically mean increased connectivity with regional airports, arguing domestic routes “get priced out” by more profitable overseas routes. He said: “The only way to maintain these routes is by public subsidy.”


Experts dispute tourism impact


Leading aviation economists have contested the idea that tourism growth should form a key part of the case for Heathrow expansion. Appearing before the Transport


Select Committee of MPs last week, former Iata chief economist Brian Pearce insisted: “Tourism is not where I would place the emphasis. Economic growth is built by developing assets and capabilities.” Asked to explain the link between


airport expansion and economic growth, Pearce said: “I don’t think it’s anything to do with tourism or employment at the airport. It’s asset- creating to help British business.” New Economics Foundation


senior economist Dr Alex Chapman agreed, saying: “Jobs are important in and around the airport. But you don’t build a motorway to create jobs at motorway service stations.” This was disputed by Chris


travelweekly.co.uk


Cuttle, associate director at Frontier Economics which produced a Heathrow-commissioned report suggesting expansion would boost economic growth. He pointed out: “On the business travel side, air travel is important for face-to-face meetings.” Cuttle noted there were “almost


13 million business passengers at UK airports last year and they must be doing that for a reason”. He added that “on the leisure side,


holidays are important for wellbeing and mental health” and argued: “Capacity constraints at Heathrow come at a cost to the UK in general. When demand exceeds supply, prices rise, passengers pay more and [some] passengers can’t fly.” Cuttle suggested: “The market is


telling us it wants more capacity at Heathrow.” However, Chapman argued:


“Clearly, there is a value to leisure Chris Cuttle


passengers. But it’s important to think about what we’re doing to the economy when we encourage this outflow of cash. In 2023, £40 billion flowed out of the economy [in overseas tourism spending].” “The proportion in the UK who


don’t fly has stayed roughly stable at 50%. So, the increase [in traffic]


will be in frequent flyers flying more frequently and in non-UK transfer passengers.” Chapman suggested that arguing


‘Heathrow is at capacity and must be expanded’ “is not an industrial strategy”. He said: “If a road is congested, you can build another road, but you could also build a railway.”


20 FEBRUARY 2025 55


PICTURES: Parliamentlive.tv; Shutterstock/EWY Media


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