Will a third airport runway help UK growth?

This is a key week for the government and its pledge to grow the UK economy.

On Wednesday, Chancellor Rachel Reeves is expected to announce plans for a third runway at Heathrow airport as part of measures to propel investment and kick some life into Britain’s lacklustre performance.

Growth, Reeves will reiterate, is the priority.

But is expanding the country’s biggest airport the right way to bring an immediate boost to the economy?

In terms of actual spades in the ground at Heathrow, the short answer is no.

A third runway has been on the cards for many years. It has also been kicked into the long grass on several occasions.

The argument in favour has always been an economic one. Large airports create jobs, promote trade and bring in both business travellers and tourists.

Heathrow currently handles £200bn worth of trade a year and – the airport’s owner would argue – provides a vital avenue for exports, particularly for small and medium-sized businesses.

But Heathrow’s infrastructure is straining at the seams.

Last year, a record 83.9 million passengers passed through its terminals with its two runways handling around 1,300 landings and take-offs every day.

Flights from the airport are currently capped at a maximum of 480,000 per year and in practical terms it has reached that limit.

A third runway would potentially increase the number of flights permitted to 720,000.

Expanding the airport would, in theory, provide an avenue for growth that simply isn’t there at the moment.

The construction project itself – the biggest privately-funded infrastructure scheme in Europe – would create thousands of jobs.

But a third runway at Heathrow is unlikely to become a reality for many years.

Firstly, a formal planning process has to take place. This type of major infrastructure project would require a Development Consent Order and unless the government changes the planning process, that would take between 18 months and two years.

Secondly, it is highly likely any decision in favour of a third runway would be subject to a judicial review.

Expansion of Heathrow is highly controversial – opponents include environmental groups, local authorities as well as nearby residents, and this stage could take another year and a half.

So even with favourable winds, it could take at least three years to get to the construction stage which is itself expected to take another six or seven years.

In terms of what can be achieved sooner that could potentially create bankable short-term benefits, separate projects to expand Gatwick and Luton airports are well-advanced and could be signed off by the Transport Secretary within weeks.

The real value of backing a third runway at Heathrow is the less tangible but no less important signal to investors about the UK’s attitude towards major infrastructure projects, say supporters.

The uncertainty over the construction of the HS2 high speed line under the previous Conservative government is widely believed to have undermined confidence in the country’s ability to turn ambitious plans into reality.

A strong commitment to Heathrow expansion might help to reverse that perception.

With the plan itself expected to cost close to £20bn, insiders say firm government support will be vital if it goes ahead.

Although the project would be privately-funded, people close to the scheme warn that it could not proceed without close co-ordination with ministers – including changes to the policy framework that sets out how the costs of the investment can be recovered.

For the chancellor herself, there could be a short-term benefit in throwing her weight behind airport expansion plans now.

Some economists have argued that if additional growth can be factored into economic forecasts currently being prepared by the Office for Budget Responsibility, it might make it easier for her to meet self-imposed fiscal rules within this parliament.

If not, then Reeves is likely to bump into her own “iron” fiscal rules to pay for day-to- day spending out of tax receipts by 2029 – meaning spending cuts or further tax rises.

Additional reporting by Dearbail Jordan.