Delaying a decision over airport capacity is economic madness

The industry has long been awaiting an announcement on additional runway capacity, so news that a final decision is not going to happen until next year is disappointing, to say the least.

Such was the level of expectation within industry and the markets that a firm unequivocal decision would be made that any further, or even perceived, delay is likely to have exactly the opposite effect to showing “Britain means business|”. Our European competitors in the aviation space must be rubbing their hands together with glee.

Although confirmation of the preferred location is still expected imminently, the fact that it will then go to a year-long consultation period, which could still potentially result in a change of direction depending on the level of support or opposition within government itself, threatens to draw out the process even further.

Any runway, regardless of whether it’s at Heathrow or Gatwick, will take a minimum of nine years to plan and build. Delaying a final decision until the winter of 2017/2018 could prove a deciding factor when carriers reassess their European hubs.

It is of course important to get decisions like this right, but any business will know that you have to do what you say you will do, otherwise the markets will punish you

A dangerous pattern is starting to form. Apparent government indecisiveness around our critical infrastructure projects risks fundamentally damaging appetite to invest in UK infrastructure, and ultimately will damage the UK’s already fragile economy. It is of course important to get decisions like this right, but any business will know that you have to do what you say you will do, otherwise the markets will punish you.

Construction activity is already at a seven-year low. Financial markets dislike uncertainty, and any lack of clarity or perceived delaying of critical decisions is likely to hit investor confidence hard. Our recent report, “The Spiralling Cost of Infrastructure”, underlined the massive extent of the problem.

By comparing the 2015 and 2016 National Infrastructure Pipeline datasets and calculating estimated costs, such as missed GDP from investment and additional design and build cost associated with delays and cancellations, we found that as little as a one-month average delay in the transport infrastructure pipeline will see the UK economy missing out on around £2bn of investment-related GDP over the next five years.This is equivalent to £48,425 for every minute of delay.

Not only that, but the costs involved in delivering all of the transport projects in the pipeline would rise by £241m over five years – equivalent to around £8m for every single day of delay. 

Current pipeline numbers omit additional runway capacity, yet even so this illustrates the extent to which delays and cancellations to infrastructure spend impact the wider economy. Ambitious projects, like the delivery of new runway capacity, have huge potential to bolster the national coffers, but any hold ups or indecision potentially has the opposite effect.  

Clearly, there are a number of reasons for projects not going ahead on schedule but, all too often, stalling could potentially be avoided or, if the impacts were clearly understood, decisions may be taken differently. The UK’s aviation strategy has long been dependent on the outcome of a decision around additional capacity in the South-east, and the fact is we can’t afford to wait another year for a final decision.  

The government needs to send an unambiguous message to the world that Britain is open for business by making firm decisions and taking decisive action to progress vital infrastructure projects at the earliest opportunity.

Government support for HS2 and the decision to finally give the go ahead for Hinkley Point are both positive, but the decision on runway capacity is different. Both Hinkley and HS2 are essentially UK focused. New runway capacity is about connecting us to international markets, which is vital as we reposition ourselves in a European context.

Making decisive, clean and unambiguous decisions without caveats is the only way that post-Brexit Britain can reap the full benefit of infrastructure investment, along with the inevitable bounce effect that will result. But by missing this latest milestone, we may look back on the current approach to runway capacity as a significant opportunity lost.

Chris Pike, Client Development Director for Infrastructure at Arcadis