It is no surprise to see a government that claims to be committed to making economic growth a priority giving the green light to expansion of Gatwick Airport and Luton Airport.
Nor, for that matter, would it be a surprise for a third runway at Heathrow Airport to be given the go-ahead by Sir Keir Starmer‘s government – particularly as Rachel Reeves, the chancellor, told the London Evening Standard in July last year that she had “nothing against expanding airport capacity… I want Heathrow to be that European hub for travel”.
Put in purely economic terms, airport expansion is a no-brainer.
The independent commission led by Sir Howard Davies, the former chairman of NatWest, and published as long ago as July 2015, concluded that “expanded airport capacity is crucial for the UK’s long-term prosperity”.
Gatwick, according to a report prepared for the airport by the independent economic consultancy Oxera, generated £5.5bn for the economy in 2023 and supported more than 76,000 jobs.
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The airport’s owner estimates that expanding it to take annual capacity to 75 million by the mid-2030s, up from the £46.5m it hit in 2019, would create around 14,000 jobs and generate an extra £1bn a year in economic benefits.
Those numbers are difficult to verify – but it can be stated with confidence that anything which provides access to new markets for both consumers and businesses will be positive for growth.
Expanding the smaller Luton Airport would, similarly, be positive for growth.
Image: A plane flies past a ‘Stop Heathrow Expansion’ sign in west London. Pic: PA
The airport in 2019 – these pre-pandemic numbers are probably the most reliable given the upheaval of the last few years – is estimated to have supported 16,500 jobs in the local area and contributed £1.1bn to GDP. Expansion on the airport’s estimates creates up to 6,100 jobs and contributes an extra £900m to GDP.
Trumping them both, of course, is Heathrow.
The Davies Commission said that building a third runway to the northwest of the airport would provide for around 40 new destinations from Heathrow and would create more than 70,000 new jobs by 2050, adding some £147bn to GDP.
It stated: “Heathrow is best-placed to provide the type of capacity which is most urgently required: long-haul destinations to new markets. It provides the greatest benefits for business passengers, freight operators and the broader economy.”
It is worth noting that among the members of the commission was Sir John Armitt, the respected former chairman of the Olympic Delivery Authority, who is now chair of the National Infrastructure Commission.
His term of office was extended by Ms Reeves in October last year in order for him to oversee the 10-year strategy ordered by the chancellor and the establishment of the National Infrastructure and Service Transformation Authority.
He will be an influential voice in this debate.
However, while the economic case for airport expansion is unimpeachable, the bigger question, perhaps, is whether it is achievable.
Political considerations
Getting approval for the expansion of both Luton and Gatwick will be a major test of the new government’s commitment to overhauling planning regulations where they are an impediment to growth.
And here there are – for supporters of expansion – ominous signs.
A decision on whether or not to expand Luton was postponed for the third time just before Christmas so that Heidi Alexander, who had just succeeded the disgraced Louise Haigh as transport secretary, could be given time to assess the application.
Climate concerns
Tied into the planning hurdles are the inevitable environmental objections.
The Climate Change Committee, the government’s independent advisory body, has already said emissions savings would have to be made elsewhere in the economy were there to be a big expansion in airport passenger numbers.
The aviation industry will doubtless argue that it has already committed to becoming net zero by the middle of the century – but the environmental lobby has a long track record of successfully campaigning against airport expansion.
On top of that are the political obstacles.
Ms Reeves – and Ms Alexander, should she back expansion of Gatwick and Luton – will face implacable opposition from within their own cabinet, not least from Ed Miliband, the energy and climate change secretary.
Backing Heathrow expansion would be more controversial still.
Sadiq Khan, the London mayor, is strongly opposed to this and so are other senior Labour figures, among them Andy Burnham, the mayor of Greater Manchester.
He argues that a third runway at Heathrow would run counter to levelling-up proposals – although it is worth noting here that some of the UK’s biggest regional airports, such as Newcastle, support a third runway on the basis that it would boost international connectivity to their region.
That means leadership will ultimately have to come from Sir Keir Starmer who, it is worth noting, voted against a third runway at Heathrow in 2018.
Government unlikely to ever get credit
Supporting airport expansion is often difficult for governments – quite apart from the environmental objections and the inevitable planning hurdles – because it takes so long to add capacity and ministers are therefore unlikely to receive credit for it during their political lifetime.
For example, the two main airport expansion projects currently under way in Europe, the new Luis de Camoes airport in Lisbon and the new Solidarity superhub in Warsaw, are unlikely to be completed until the mid-2030s.
But the latter, in particular, highlights how other European governments have no hesitation in seeing airport expansion as a major generator of growth.
It is not alone. Amsterdam’s Schiphol Airport, an increasingly important competitor to Heathrow, is currently investing some €6bn in upgrades with the aim of expanding both passenger and flight numbers. Budapest, an airport once owned by BAA, the former parent of Heathrow and Gatwick, is looking to build a third terminal that would generate an extra three million passengers by the end of the decade.
These examples highlight how other European governments are less squeamish about putting airport expansion over environmental considerations in the name of pursuing economic growth.
You can be sure that the international investors who own Heathrow, Gatwick and Luton will be looking to the UK to do likewise.
Britain’s biggest high street bank is in talks to buy Curve, the digital wallet provider, amid growing regulatory pressure on Apple to open its payment services to rivals.
Sky News has learnt that Lloyds Banking Group is in advanced discussions to acquire Curve for a price believed to be up to £120m.
City sources said this weekend that if the negotiations were successfully concluded, a deal could be announced by the end of September.
Curve was founded by Shachar Bialick, a former Israeli special forces soldier, in 2016.
Three years later, he told an interviewer: “In 10 years time we are going to be IPOed [listed on the public equity markets]… and hopefully worth around $50bn to $60bn.”
One insider said this weekend that Curve was being advised by KBW, part of the investment bank Stifel, on the discussions with Lloyds.
If a mooted price range of £100m-£120m turns out to be accurate, that would represent a lower valuation than the £133m Curve raised in its Series C funding round, which concluded in 2023.
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That round included backing from Britannia, IDC Ventures, Cercano Management – the venture arm of Microsoft co-founder Paul Allen’s estate – and Outward VC.
It was also reported to have raised more than £40m last year, while reducing employee numbers and suspending its US expansion.
In total, the company has raised more than £200m in equity since it was founded.
Curve has been positioned as a rival to Apple Pay in recent years, having initially launched as an app enabling consumers to combine their debit and credit cards in a single wallet.
One source close to the prospective deal said that Lloyds had identified Curve as a strategically attractive bid target as it pushes deeper into payments infrastructure under chief executive Charlie Nunn.
Lloyds is also said to believe that Curve would be a financially rational asset to own because of the fees Apple charges consumers to use its Apple Pay service.
In March, the Financial Conduct Authority and Payment Systems Regulator began working with the Competition and Markets Authority to examine the implications of the growth of digital wallets owned by Apple and Google.
Lloyds owns stakes in a number of fintechs, including the banking-as-a-service platform ThoughtMachine, but has set expanding its tech capabilities as a key strategic objective.
The group employs more than 70,000 people and operates more than 750 branches across Britain.
Curve is chaired by Lord Fink, the former Man Group chief executive who has become a prolific investor in British technology start-ups.
When he was appointed to the role in January, he said: “Working alongside Curve as an investor, I have had a ringside seat to the company’s unassailable and well-earned rise.
“Beginning as a card which combines all your cards into one, to the all-encompassing digital wallet it has evolved into, Curve offers a transformative financial management experience to its users.
“I am proud to have been part of the journey so far, and welcome the chance to support the company through its next, very significant period of growth.”
IDC Ventures, one of the investors in Curve’s Series C funding round, said at the time of its last major fundraising: “Thanks to their unique technology…they have the capability to intercept the transaction and supercharge the customer experience, with its Double Dip Rewards, [and] eliminating nasty hidden fees.
“And they do it seamlessly, without any need for the customer to change the cards they pay with.”
News of the talks between Lloyds and Curve comes days before Rachel Reeves, the chancellor, is expected to outline plans to bolster Britain’s fintech sector by endorsing a concierge service to match start-ups with investors.
Lord Fink declined to comment when contacted by Sky News on Saturday morning, while Curve did not respond to an enquiry sent by email.
Lloyds also declined to comment, while Stifel KBW could not be reached for comment.
The UK economy unexpectedly shrank in May, even after the worst of Donald Trump’s tariffs were paused, official figures showed.
A standard measure of economic growth, gross domestic product (GDP), contracted 0.1% in May, according to the Office for National Statistics (ONS).
Rather than a fall being anticipated, growth of 0.1% was forecast by economists polled by Reuters as big falls in production and construction were seen.
It followed a 0.3% contraction in April, when Mr Trump announced his country-specific tariffs and sparked a global trade war.
A 90-day pause on these import taxes, which has been extended, allowed more normality to resume.
This was borne out by other figures released by the ONS on Friday.
Exports to the United States rose £300m but “remained relatively low” following a “substantial decrease” in April, the data said.
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Overall, there was a “large rise in goods imports and a fall in goods exports”.
A ‘disappointing’ but mixed picture
It’s “disappointing” news, Chancellor Rachel Reeves said. She and the government as a whole have repeatedly said growing the economy was their number one priority.
“I am determined to kickstart economic growth and deliver on that promise”, she added.
But the picture was not all bad.
Growth recorded in March was revised upwards, further indicating that companies invested to prepare for tariffs. Rather than GDP of 0.2%, the ONS said on Friday the figure was actually 0.4%.
It showed businesses moved forward activity to be ready for the extra taxes. Businesses were hit with higher employer national insurance contributions in April.
The expansion in March means the economy still grew when the three months are looked at together.
While an interest rate cut in August had already been expected, investors upped their bets of a 0.25 percentage point fall in the Bank of England’s base interest rate.
Such a cut would bring down the rate to 4% and make borrowing cheaper.
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Analysts from economic research firm Pantheon Macro said the data was not as bad as it looked.
“The size of the manufacturing drop looks erratic to us and should partly unwind… There are signs that GDP growth can rebound in June”, said Pantheon’s chief UK economist, Rob Wood.
Why did the economy shrink?
The drops in manufacturing came mostly due to slowed car-making, less oil and gas extraction and the pharmaceutical industry.
The fall was not larger because the services industry – the largest part of the economy – expanded, with law firms and computer programmers having a good month.
It made up for a “very weak” month for retailers, the ONS said.
Monthly Gross Domestic Product (GDP) figures are volatile and, on their own, don’t tell us much.
However, the picture emerging a year since the election of the Labour government is not hugely comforting.
This is a government that promised to turbocharge economic growth, the key to improving livelihoods and the public finances. Instead, the economy is mainly flatlining.
Output shrank in May by 0.1%. That followed a 0.3% drop in April.
However, the subsequent data has shown us that much of that growth was artificial, with businesses racing to get orders out of the door to beat the possible introduction of tariffs. Property transactions were also brought forward to beat stamp duty changes.
In April, we experienced the hangover as orders and industrial output dropped. Services also struggled as demand for legal and conveyancing services dropped after the stamp duty changes.
Many of those distortions have now been smoothed out, but the manufacturing sector still struggled in May.
Signs of recovery
Manufacturing output fell by 1% in May, but more up-to-date data suggests the sector is recovering.
“We expect both cars and pharma output to improve as the UK-US trade deal comes into force and the volatility unwinds,” economists at Pantheon Macroeconomics said.
Meanwhile, the services sector eked out growth of 0.1%.
A 2.7% month-to-month fall in retail sales suppressed growth in the sector, but that should improve with hot weather likely to boost demand at restaurants and pubs.
Struggles ahead
It is unlikely, however, to massively shift the dial for the economy, the kind of shift the Labour government has promised and needs in order to give it some breathing room against its fiscal rules.
The economy remains fragile, and there are risks and traps lurking around the corner.
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Concerns that the chancellor, Rachel Reeves, is considering tax hikes could weigh on consumer confidence, at a time when businesses are already scaling back hiring because of national insurance tax hikes.
Inflation is also expected to climb in the second half of the year, further weighing on consumers and businesses.