The impact of an infrastructure project
A new runway at London's Gatwick airport
The UK government has just approved plans for a second runway at London’s Gatwick airport. This is a significant $2.9 billion infrastructure investment for the UK economy. This is a privately financed project that should increase the number of flights from the airport from 280,000 to 389,000 by 2040.
As an investment project, Gatwick's second runway is a significant injection into the UK economy and is expected to trigger a multiplier effect that will increase the UK's national income by more than the initial £2.2 billion ($2.9 billion) investment.
Gatwick’s second runway is expected to bring benefits to various stakeholders. The airport itself is expected to experience an increase in revenues due to the increased use of the airport by various airlines and the associated income generated from renting space to services within the airport, such as retailers. Other businesses, such as retailers, parking businesses and car hire companies, will also benefit from higher passenger numbers at Gatwick.
The new runway will create jobs in the short term during the project's construction phase, such as construction work, and also through direct employment at Gatwick when the second runway is completed, including service-based work, which will enable the larger airport to function efficiently.
For Gatwick Airport's customers, the increased capacity at the airport created by the second runway will provide more opportunities for flights, which may be particularly useful for people living in London and the South East of England.
There are, however, opponents to Gatwick’s new runway. Environmental groups are opposed to the external costs associated with the initial construction of the airport and the subsequent externalities resulting from the increased number of flights. One particular concern is the environmental impact of increased travel to Gatwick Airport.
In response to this, Gatwick Airport has agreed to stricter noise controls and provide financial support for insulation for residents living near the airport. Another concern for local people is the increased number of people travelling to the airport. Part of granting the runway plans comes with setting targets for the number of people who travel to Gatwick using public transport.
A further argument made by those who oppose Gatwick’s new runway is that the project could increase carbon emissions and contribute to climate change, contrary to government support. The second runway is a good example of the conflict between economic growth and the UK’s commitment to net zero.
Questions for discussion
- Why is a new runway at Gatwick considered an infrastructure project?
- How might the new runway at Gatwick affect aggregate demand in the UK?
- How might the new runway at Gatwick affect the UK's potential output?
- Discuss the advantages and disadvantages of opening a new runway at Gatwick Airport.