British Airways Boeing 787-8 Dreamliner aircraft spotted flying on final approach over the roofs of the houses of Myrtle avenue for landing at London Heathrow Airport LHR in the UK.
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U.K. Finance Minister Rachel Reeves on Wednesday unveiled plans to deliver a shot in the arm for the country’s ailing economy, signaling she backs the long-delayed expansion of one of the world’s busiest airports.
In a major growth speech in Oxfordshire, Reeves said that a third runway at London’s Heathrow Airport was “badly needed,” adding it would boost investment, support economic expansion and potentially create create over 100,000 jobs.
Citing research from the consultancy Frontier Economics, Reeves suggested a third runway at Heathrow could increase gross domestic product by 0.43% by 2050, with much of that boost going to areas outside of London and the southeast of the country.
Her comments came amid a series of project announcements to reform the U.K.’s planning system, including the redevelopment of Manchester United’s soccer stadium in north England and investment in the Oxford-Cambridge “growth corridor.”
Reeves said “low growth is not our destiny. But growth will not come without a fight.” She promised to go “further and faster” to fulfil what she’s called her “number one priority” of kickstarting the U.K.’s economy.
The ruling center-left Labour Party has repeatedly pledged to prioritize economic growth, with Reeves last week telling reporters at the World Economic Forum in Davos, Switzerland, that this mission is more important to the government than its net-zero emissions target.
Supporters of a third runway at Heathrow say it would better connect the U.K. to long-haul destinations, boost trade, jobs and, ultimately, economic growth.
Environmental campaign groups, meanwhile, have sharply criticized the expansion plans at Europe’s busiest hub, saying economic growth can be achieved without undermining the country’s climate targets.
Reeves described net zero as the “industrial opportunity of the 21st century,” saying there is no trade off between economic growth and the energy transition.
The Treasury has also reportedly been considering a second runway at London’s Gatwick Airport and increased capacity at Luton Airport.
Britain’s economic output returned to growth in November last year, although the expansion was weaker-than-expected at just 0.1%.
A report published last year found that the U.K.’s net-zero economy, which spans sectors including renewables and green finance, expanded by 9% in 2023 — in sharp contrast to the meager growth seen in the wider economy.
“The green economy is growing fast, and with greater government support it could expand even quicker. It needn’t be a question of growth or the environment when we can have both — especially when the green economy is outpacing other sectors,” Rosie Downes, head of campaigns at Friends of the Earth, said in a statement.
‘No easy routes’ to growth
Rachel Reeves, UK Finance Minister, speaking on CNBC’s Squawk Box outside the World Economic Forum in Davos, Switzerland on Jan. 22, 2025.
Gerry Miller | CNBC
The finance minister has come under sustained pressure since unveiling the Treasury’s spending and taxation plans last fall, which centered on increasing the tax burden on British businesses. The package has drawn widespread criticism from industry leaders over the impact on investment, jobs and economic growth.
Reeves has defended that tough measures were necessary to achieve economic stability and that there was “no alternative.” She has also said tax rises on businesses would be a one-off, telling the Confederation of British Industry last November that she was “not coming back with more borrowing or more taxes.”
Gareth Davies, shadow finance minister and lawmaker of the Conservatives, told CNBC Wednesday that the opposition party supported pro-growth agenda, but that tax announcements in the Autumn Budget had damaged business confidence and deterred investment.
“We would support any pro-growth, deregulation – that’s absolutely critical for any economic growth in our country – but you can’t have that at the same time as anti-growth tax policies, which is what this Labour government has introduced since it came to power, and particularly in the Budget,” he told CNBC’s “Squawk Box Europe.”
“But the broad principle is that we do want more infrastructure in our economy and our country, and that this will boost growth, so let’s see what the announcements are today,” he said, ahead of Reeves’ speech.
