In a report released today, the British Chambers of Commerce (BCC) called upon the government to develop a long-term aviation policy that supports business growth and job creation.

The report, entitled “Flying in the Face of Jobs and Growth” sets out recommendations that would see the UK’s aviation infrastructure improved to support growth in the private sector. They include building additional capacity at our airports and scrapping proposed increases to Air Passenger Duty (APD). The report also includes analysis which demonstrates that the lack of a clear aviation policy means the UK could miss out on millions in GDP, and much-needed jobs.

Aviation capacity will not keep up with demand

Aviation not only allows businesses to deliver high-value goods, move employees, and link to new markets. Some 40%[1] (in value) of the UK’s exports go by air; good connectivity is vital to attracting inward investment, and driving growth in tourism. If businesses are to deliver sustained economic growth, then we need a long-term plan to improve the UK’s aviation infrastructure.

Current aviation capacity will not cope with the projected 335 million passengers at UK airports expected by 2030[2]. The government must increase both the range and frequency of flights, ensure there is sufficient airport and airspace capacity and keep air transport prices competitive.

In other European countries, expanded hub airports, such as Amsterdam’s Schiphol, Paris Charles de Gaulle, and Frankfurt International, are increasing the potential for investment and economic competitiveness. The UK requires both an expanded hub airport and greater regional connectivity to remain competitive. For example, an additional runway at Heathrow would address the capacity issue and ensure the UK has a hub airport that can compete with other countries. Heathrow has fallen behind its rivals in serving the growing BRIC economies. Paris and Frankfurt already boast 1000 more annual flights to the three largest cities in China than Heathrow[3].

UK aviation taxes are the highest in Europe

The report recommends the scrapping of planned increases in Air Passenger Duty (APD) as a priority for government. In the UK, APD has increased between 140% and 320% since 2007, with a further increase of 5% expected in April 2012. Many European countries, including Belgium, Holland, and Denmark, have abandoned aviation taxes due to the negative effect on their economies.

Analysis in the BCC report shows that a 5% year-on-year rise in APD could cost the economy at least £70m by 2015, £190m by 2020 and £660m by 2030; and reduce the number of jobs by as much as 25,000 by 2015, 71,000 by 2020 and 250,000 by 2030.

The EU’s carbon Emissions Trading Scheme (ETS) will apply to the aviation industry from 2012, and bring additional revenues to the Treasury. While the BCC wants to see the aviation sector deal with carbon emissions, current plans effectively mean double taxation for Britain’s aviation industry. The government should offset current APD taxation with the direct revenue it will receive from the EU ETS. This will ensure our aviation industry can continue to support supply chains, jobs and economic activity.

Commenting on the report, John Longworth, Director General of the British Chambers of Commerce, said:

“With public finances straitened and consumer spending depressed, all eyes are on the private sector to blaze a trail back to prosperity. The onus is on creating a strong, rebalanced economy, powered by exports of goods and services. All modes of transport serve business, but it is air transport that businesses rely on to get their employees and goods quickly to distant markets. Identifying the link between air travel and economic performance is easy. What’s harder is to convince the government of the need for a clear plan to ensure aviation can play its full part in ensuring economic recovery.

“In the last year we have seen the government abandon an Air Transport White Paper widely applauded for its long-term clarity. Ministers have cited their cancelling of its key projects, including the much-needed third runway at Heathrow, as an early success. The government now has a simple choice. It must set a bold, long-term aviation policy that serves our businesses and boosts economic recovery.”