British Finance Minister Backs Heathrow Runway to Boost Economy

By Andrew MacAskill
EYNSHAM, England (Reuters) – British finance minister Rachel Reeves gave the government’s backing to a long-delayed new runway at London’s Heathrow Airport on Wednesday as the centrepiece of her plan to speed up the country’s sluggish economy.

Reeves, under pressure to address concerns about growth after a bond market selloff this month, also listed plans for new wind farms and reservoirs and a “growth corridor” between the university cities of Oxford and Cambridge.

Announcing support for a third runway at Heathrow, Europe’s busiest airport, Reeves said past delays had cast doubt among investors over the seriousness of successive governments to do what is needed to open new export markets.

> “We cannot duck the decision any longer,” Reeves said in a speech at a medical equipment plant operated by Siemens Healthineers near Oxford.

She denied the increase in flights would undermine Britain’s net zero commitments but campaigners and London Mayor Sadiq Khan – a senior figure in the governing Labour Party – opposed the move on climate concerns.

Reeves is seeking to address fears that Britain’s economy is growing too slowly to reduce its public debt burden quickly. However, many of the projects on her list will take years to complete, while the tax increases she announced for businesses in October swiftly hit corporate hiring and confidence.

Farmers in tractors gathered outside the Siemens plant where she spoke to protest her move to end an inheritance tax exemption for farming families.

Reeves said the government would clear the way for 16 gigawatts of offshore wind power generation and announced investments by a state fund of 65 million pounds ($80.7 million) in an electric vehicle-charging network and 28 million pounds in a mining operation in southwest England.

She emphasized Britain would seek to build up its post-Brexit trade ties with the European Union and strengthen its relationship with the U.S. under President Trump, while the business minister would visit India soon to restart talks on a trade deal.

Reeves and Prime Minister Keir Starmer promised voters before last July’s election they would turn Britain into the fastest-growing Group of Seven (G7) economy. However, since then it has lost momentum, with many employers blaming Reeves’ tax hike.

This month’s surge in global government borrowing costs – which hit the UK particularly hard – only heightened pressures on Reeves to boost the economy.

OVERCOMING LOW GROWTH

In Wednesday’s address, Reeves stated that home-building and new transport links between Oxford and Cambridge would help create “Europe’s Silicon Valley.” She also highlighted 8 billion pounds ($9.95 billion) of investment over five years by water companies, including the construction of nine reservoirs.

> “Low growth is not our destiny. But growth will not come without a fight,” she asserted.

Starmer and Reeves have previously stated they won’t allow infrastructural opponents from blocking major projects and are in the process of streamlining the planning system.

Heathrow Chief Executive Thomas Woldbye mentioned to Reuters that a third runway could become operational by 2035. “There is a mood in government to show economic growth. We are now an essential part of that plan,” Woldbye remarked.

Greenpeace UK’s policy director, Doug Parr, criticized the government, saying it should focus on renewable power and innovation instead of pursuing polluting projects.

The Bank of England has forecast no growth for Britain’s economy in the second half of 2024, with an expectation of 1.5% growth in 2025, largely due to increased government spending.

Morgan Stanley, Goldman Sachs, and J.P. Morgan have predicted growth of under 1% for this year, while the International Monetary Fund noted Britain would still outpace its sluggish European counterparts.

Gilles Moec, chief economist with AXA, stated that Britain and other governments are seeking solutions that avoid major increases in public spending, warning that insufficient funding for large programs could prevent a significant boost in confidence.

($1 = 0.8039 pounds)