The economic boost from a Heathrow third runway could be a tiny fraction of previous estimates, government analysis shows, while the overall trade-off from the bigger airport could set the UK back by as much as £62.5bn.
As ministers promised to speed up expansion of the London airport in the name of economic growth, documents prepared by the Department for Transport said the runway was expected to boost GDP by only up to 0.05% – 90% less than the 0.5% previously stated. The DfT calculates the net present value of the scheme, even if entirely privately financed, to be between -£23.4bn and -£62.5bn. Net present value is defined by the DfT as the overall social value of expanding Heathrow, compared with not doing it, adding all costs and benefits.
“Government analysis shows Heathrow third runway would boost GDP by only 0.05%, a 90% cut from previous estimates, with net cost up to £62.5bn.”
That figure incorporates between £29bn and £42.4bn in positive benefits to passengers – primarily, lower air fares – and wider economic benefits. But the DfT appraisal calculates those gains as outweighed by the social and environmental impact of the runway, which it estimates as between £58bn and £82bn. Profits at airlines and other airports are expected to fall by about £25bn, according to the appraisal.
The chancellor, Rachel Reeves, has championed rapid expansion of Heathrow in the name of economic growth, which she described as “this government’s top priority” when the consultation for the next stage of the legislative process was launched on Thursday. The documents state that “external analysis, commissioned by the DfT, has found that the scheme could add up to 0.05% to GDP in 2056”. Figures previously cited by the government have been in the range of 0.43%-0.5% growth.
Heathrow said the new figures did not capture all the economic benefits, while a government spokesperson said they were “only part of the picture”. However, Alex Chapman, the head of economic policy at the New Economics Foundation thinktank, said: “In its desperation for a fraction of a per cent of GDP growth, this government has lost its way. They said they were backing Heathrow expansion for economic reasons but their own analysis shows it won’t deliver. The results from the department’s impact assessment must be some of the worst in history, and reflect what we’ve been saying for the past year: the economic argument for expansion does not add up.”
A DfT spokesperson said: “Net present value is just one part of the overall picture.”