At the beginning of 2023, the Prime Minister set out the Government’s five main objectives, underpinned by a clear focus on “…growing the economy, creating better-paid jobs and opportunity right across the country”.
This year’s Autumn Statement comes at a critical point in pursuit of these goals – and as the measures to boost the UK economy are sought, we have several suggestions on how the UK can pull ahead of the pack and sustain long-term growth.
As the UK’s hub airport, Heathrow is both the gateway to the world for the UK’s people and businesses, and the country’s front door for global trade and tourism. In 2022, 60 million passengers travelled through Heathrow, to and from 239 destinations, via 89 airlines. In September 2023, OAG announced that Heathrow had regained its spot as the most globally connected hub airport, beating all of the European hub rivals. Heathrow also spent £1.3bn on investment last year alone with businesses up and down the UK, and over £200 billion in UK trade passed through the airport – owning to positive trade balance of over £30bn - demonstrating our role a the front line of the UK’s push for export-led growth.
As such, Heathrow believes measures and policies taken either at or in support of UK aviation, have a direct impact on the UK’s future growth aspirations. Which is why, as part of the Autumn Budget, we are calling on Government to deliver three key policies:
Sustainable Aviation Fuel: Delivering net-zero for the aviation sector
Sustainable Aviation Fuel (SAF) is an alternative to traditional fossil-based aviation fuels, designed to reduce the environmental impact of aviation, delivering 70% lifecycle carbon reduction when compared to kerosene. SAF can be used as a drop-in with existing planes and infrastructure, replacing the need for fossil fuels. The technology is proven and already in use in commercial aircraft today, using what would otherwise be waste material.
The appetite to invest into SAF and to decarbonise aviation is there, but investors want certainty in longer-term domestic use of before pouring in their capital. Government must act now to support a SAF industry for the UK, by introducing a price support mechanism and by acting on the commitment for at least five commercial-scale SAF plants to be in construction in the UK by 2025.
A price support mechanism – necessary due to the lack of price certainty for SAF – has helped develop a world-leading renewable energy industry with on and offshore wind in the UK, which is now cheaper than the alternatives and has brought huge economic benefits. But the US and EU are surging forwards in the race to create new SAF industries, and whilst the UK has all the natural advantages to be able to join them – the UK Government need to move quickly. A price support mechanism would de-risk and incentivise investment in domestic SAF production facilities and would help mitigate the “green premium” cost differential between traditional jet fuel and SAF.
The UK must be at the forefront of the global SAF race. A thriving SAF market in the UK and within Heathrow’s route network would be felt across the UK: A domestic SAF market could support 60,000 jobs across all UK regions and nations and be worth £10 billion in GVA benefits by 2050. If Government implements the necessary policies, the many benefits of aviation – connectivity, trade, tourism, and investment – can be protected.
Tax-free shopping: Boosting tourism and international spending
For years, visitors from outside the European Union were eligible for tax-free shopping across the UK, saving 20% on the cost of goods. This incentive made the UK an attractive and competitive destination for price-sensitive visitors, boosting British sales, and strengthening the economic sustainability of British retailers and transport hubs. But this all changed when the UK Government removed tax-free shopping following Brexit.
The Office of Budget Responsibility had warned of the costs of abolishing tax-free shopping “as the UK becomes less attractive for affected tourists relative to alternative EU destinations such as Paris or Milan”, and the Office of Budget Responsibility also pointed to potential 38% fall in sales.
With the UK’s international competitiveness on the line, it is critical that Government remove the ‘tourist tax’ to level the playing field for British businesses and to deliver much needed economic growth across the country, listening to the hundreds of across all UK regions and nations.
Rail investment: Unlocking the future of rail and connectivity
Heathrow is not just a hub for UK aviation, but a hub for surface access connectivity. We are the UK’s busiest coach station and a rail hub with sixteen trains per hour with connectivity for the Elizabeth Line, London Underground and Heathrow Express.
But there is more to do in order to deliver a well-connected Heathrow via rail. We are calling on HMT to signal support for private rail investments in domestic networks, such as Southern Rail, and to set out a clear framework for delivery. We also need HMT to ensure the fiscal regime works for all UK rail, this includes reviewing the Office of Rail and Road’s new private rail charge of £5mile/ train mile on open access operators to airports. The measure undermines profit and pushes people onto less sustainable transport and disincentivises much needed investment into UK rail.
The Autumn Statement is an opportunity for Government to set a direction of travel that signals its ambition to be globally competitive and world leading. The UK has the opportunity to signal a strong commitment to sustainable growth, grow our opportunities as global destination of choice for tourists, and deliver tangible private rail investment worth billions the UK economy. The solutions are clear, and action firmly sits with the Chancellor.
