Business

Economist casts doubt on north's 'Heathrow dividend'

Planes land at Heathrow airport as a vote in parliament gave the go-ahead for a third runway at Heathrow by a two thirds majority
Gary McDonald Business Editor

A SENIOR economist as cast doubt on the projected economic benefit which will come Northern Ireland's way as a result of Parliamentary approval for controversial plans to build a third runway at London's Heathrow airport.

The government won a key vote in the Commons late on Monday night by 415 votes to 119 in favour of the expansion, which has been hailed as a "truly historic decision" which will "open the doors to a new era in the UK's global trading relationships".

According to the CBI, building a new runway will "lift prosperity across the country", with the ultimate prize being "tens of thousands of jobs and billions of pounds of growth for the UK economy."

Figures of £5 billion of gross value added (GVA) and 5,000 jobs have previously been quoted as the possible gain for Northern Ireland.

But Dr Esmond Birnie, senior economist at the Ulster University's Economic Policy Centre, suggests the figures "do seem implausibly high".

He said: “This yes vote should certainly be beneficial to the Northern Ireland economy. Anything which lifts the capacity constraint which has been hanging over airport capacity in the South East makes it more likely we can get greater air route connectivity, especially in terms of good access to an international hub.

“That could imply gains for tourism, trade, FDI and productivity. Significantly, in 2017 the London government did name Belfast International as one of the regional airports which was likely to gain new routes and slots as result of expanded capacity at Heathrow."

He went on: “The government's own consultation paper in 2017 suggested that a combination of gains to passengers and some of the wider economic benefits could boost the UK economy by about £60 billion annually by 2030.

“Given the Northern Ireland economy's overall share of UK GDP of about 2.5 per cent, that might imply a gain to the region of up to £1.5 billion in 2030 is plausible: an increase in the 2018 level of local GDP of about 3 per cent.”

But Dr Birnie added: "As for the £5 billion and 5,000 jobs claim, since details have not been provided as to how such sums were estimated, it is very hard to evaluate such figures, although they appear to come from an earlier estimate that the overall UK economy could gain by a total of up to £210 billion (and hence taking 2.5 per cent of that which would be about £5 billion).

“However, since those estimates imply every job created in Northern Ireland would have an associated total economic benefit of one million pounds in terms of GVA, they do seem implausibly high. The jobs associated with airport expansion would have to have extremely high rates of pay or related profits."

Business groups in the north, however, have applauded the historic Commons vote, in which nine of the 10 Democratic Unionist MPs voted for the expansion (Sir Jeffrey Donaldson was not recorded among the ayes), as did independent MP Lady Sylvia Hermon.

Retail NI chief executive Glyn Roberts said: “This is the right decision for Northern Ireland and the UK economy as a whole, particularly with the approach of Brexit and the need for increased global air connectivity.

“We have long supported the need to expand Heathrow as it will secure Northern Ireland's connection to a globally competitive hub airport enabling increased tourism which will boost spending in our local retail sector.”

Christopher Morrow, head of policy at the NI Chamber of Commerce and Industry, said: “This positive outcome is an example of the bold decisions that are needed to demonstrate that the UK is open for business at a time of change and uncertainty.

"The green light for Heathrow's expansion shows international investors, trading partners and competitors that the UK is serious about being at the heart of the global economy. A vote to proceed with expansion is also a signal to businesses that Westminster is serious about supporting UK growth in every region of the country.

“For Northern Ireland specifically, this presents an opportunity to boost the connectivity of the region with other areas in the UK and beyond, especially as Heathrow is a key facilitator for trade - a point which will become increasingly important post-Brexit.”

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