Expansion at Heathrow has been discussed for over 50 years. It is a politically sensitive, emotive, and complex topic. It would have lots of impacts – many positive, many negative – on many different aspects of society.

Frontier was commissioned by Heathrow to carry out cost benefit analysis (CBA) of different expansion options. Our independent report recognises that this is a complex issue, and is clear on all aspects – the costs, the benefits, the overall impact, and uncertainties.

The starting point in our analysis was to review the CBA that was previously carried out for the government by the independent Airports Commission (AC) (2012-2015). The AC published thousands of pages of analysis, both quantitative and qualitative, which included two different types of CBA that both found a positive case for expansion. The AC’s conclusions were “clear and unanimous… We have concluded that the best answer is to expand Heathrow’s runway capacity”. The DfT subsequently updated the AC’s analysis in 2017/18 and also found a positive business case.

In line with the approach taken by the AC, our analysis is split into two main parts:

• Bottom-up analysis: First, we have estimated a number of different cost and benefit types individually, before adding them together. This is not a formal update of the AC / DfT analysis – especially since many of the models underpinning that analysis are not publicly available. We have estimated some of the costs and benefits ourselves, based on detailed modelling, using the most up-to-date industry data. For others, we take the previous AC / DfT results and carry out high level extrapolations.
• CGE modelling: Second, like the AC, we have also carried out ‘Computable General Equilibrium’ (CGE) modelling. This modelling takes into account that the economy is made up of a number of interconnected sectors, and how expansion in one sector impacts on others, with a number of first-, second- and third-order impacts. The model considers impacts on the labour market, household spending, trade and investment, and exchange rates, etc., and seeks to distil the different impacts down into an overall impact on the UK economy.

Under both approaches, and under different cuts of the results, we find a strong net positive business case for expansion, with our results broadly in line with those produced by the AC and DfT. Our analysis was shared with HMT and the DfT and was ultimately referenced by the Chancellor of the Exchequer, Rachel Reeves, when she announced the government’s support for Heathrow expansion in January.

Click here to read the full report.

For all media enquiries, please contact Alex Charlwood on alex@arclex.com.