Measures outlined by Chancellor Rachel Reeves to ‘kickstart economic growth’ have received a cautious welcome from business organisations.
Speaking to an audience of business chiefs at Siemens in North Oxfordshire, the Chancellor announced that the UK Government supports and is inviting proposals for a third runway at Heathrow.
Research published by Frontier Economics suggested that 60% of the economic boost from a third runway would be felt by areas outside of London and the South East.
Air freight represented 57% of the UK’s non-EU exports by value in 2023, with over 60% of freight coming through the UK doing so through Heathrow. International connectivity also supports tourism and business links, the UK Government said, with overseas visitors spending £31 billion on their visits to the UK in 2023 and 15 million business travellers using Heathrow in the same year.
Karen Dee, Chief Executive, AirportsUK, said:
“Sectors as diverse as transport equipment, pharmaceuticals, the creative industries and clothing rely on good air links, to the tune of billions of pounds of value.
“Growing connectivity into global markets will support these sectors and countless others, creating jobs, bringing new customers to our goods and services, and opening new opportunities for investment.”
“Aviation’s contributions are also shared across the entire country, with all regions of the UK benefitting through increased trade opportunities brought about by better connectivity.”
Reeves also confirmed that the UK Government would support producers of Sustainable Aviation Fuel with an investment of £63 million into the Advanced Fuels Fund in 2025-26, and will deliver a Revenue Certainty Mechanism to encourage investment into the industry. These measures will encourage more investors to back production in the UK, bringing jobs to areas like South Wales, the UK Government said.
In 2022 Lanzatech UK Ltd was award almost £25 million from the Advanced Fuels Fund for a project based in Port Talbot which is developing a commercial scale plant that converts steel mill off-gases into ethanol and then uses alcohol-to-jet technology to produce Sustainable Aviation Fuel.
Russell Greenslade, Director, CBI Wales, said:
“It’s crunch time for growth and the Chancellor has heeded business’ call to go further and faster. This is most evident in Ministers grasping decisions that have sat on the desk of government for too long. This positive leadership and a clear vision to kickstart the economy and boost productivity is welcome.
“A relentless focus on growth means making some bold moves, accepting trade-offs and taking risks. Leaders in boardrooms do that every day. Welsh business understands those pressures and is ready to partner with, and invest alongside, a government that is brave and optimistic about the UK’s potential.
“The Chancellor’s announcements are smart, looking to leverage the UK’s strengths including our world class universities, innovation and openness to global talent. Along with action on planning reform, commitments to airport expansion and transport infrastructure improvements, and mobilising pension capital this is the kind of initiative that will give confidence to investors at home and abroad.
“Businesses were in need of a boost in confidence after a tough period that has seen their overheads increase and headroom for investment squeezed. Firms in the everyday economy will need to stay front and centre of government decisions to create the jobs, investment and growth we all want.”
Gus Williams, interim CEO at Chambers Wales South East, South West and Mid, said:
“Encouraging growth will take more than a few landmark projects; it will require wholesale reform.
“The Welsh economy faces many bottlenecks including the complexity of the political landscape which slows decision-making, the lack of a single point of contact for businesses to make investment decisions, the bottlenecks in the planning system, the lack of a long-term infrastructure plan and long-term funding, and perhaps most importantly the skills and manpower shortages which are sharply driving up costs on top of tax and National Minimum Wage changes.
“Businesses are holding off on investment decisions until they have more clarity about what exactly the government plans and reforms mean for them.”
UKHospitality urged the Chancellor to bring forward a specific growth plan for hospitality, and other sectors in the foundation economy, that it says can deliver growth swiftly.
Kate Nicholls, Chief Executive of UKHospitality, said:
“Driving economic growth is rightly the Government’s top priority, but we need to see a plan for growth that reaches the whole economy.
“Big infrastructure projects are much-needed but the benefits won’t be realised for years or decades to come. In comparison, hospitality and the foundation economy can deliver growth now, if it is properly backed.
“Hospitality was the biggest driver of economic growth in November, demonstrating that we are already on the strongest growth path, despite the intense cost pressures our businesses face.
“We need a clear growth plan for the foundation economy, which can deliver change everywhere and for everyone, as one of the largest employers in the country. Backing hospitality is an investment in vibrant towns, cities and communities – an essential component of creating investment hotspots.
“That plan has to start with reassessing the changes to employer NICs, which hammer sectors like hospitality and will be the single biggest blocker to growth and investment.
“The Chancellor recognised the power of businesses to drive growth, create new jobs and generate new opportunities. My message is to back a sector like hospitality that can do that now, and deliver for the economy, jobs and communities.”
Tina McKenzie, Policy Chair of the Federation of Small Businesses (FSB), said:
“This decision on Heathrow is totemic, and faster action to unblock decisions on infrastructure projects is entirely right. Small firms want to see infrastructure upgrades and to enjoy the benefits of better connectivity. Increased exports, tourism, and more growth-oriented regulations will help to unlock success.
“The Chancellor is right to tackle supply-side constraints, and now we must see every single Cabinet Minister, and every arm of the state, double down on growth action and scrap anti-growth policies that hold businesses, jobs and living standards back.
“To get these new projects built rapidly and cost-efficiently, Government must use our fantastic small engineering, construction and business sector, with a much-improved procurement process, simpler applications and set targets for SME involvement.
“Today’s announcements must herald the start of an unyielding focus on growth, and more action to help small firms. Pro-growth choices, whether through the Spending Review, the next King’s Speech with a new Small Business Bill, action on regulators, improving the Employment Rights Bill and revolutionising HMRC’s customer service, are an absolute must. The whole country needs to prove the UK is a great place to do business, and that entrepreneurs can be given the confidence necessary to make growth a reality.”