The UK government's plan to revamp the system of business rates will be little short of a disaster that would make the country's airports "uninvestable", an airports conference in London was told on Thursday.
While outlook for the sector in terms of expansion, connectivity and demand is buoyant, the chief executives of several major UK airports attending the AirportsUK 2024 conference in London singled out proposed changes to business rates as the single biggest challenge facing the sector. Essentially, the government wants to reduce business rates for high street retailers, but can only do this with a big rise in rates for companies with large properties, such as online retailers with warehouses and, of course, airports. The changes are due to be brought in from April 2026, and the lobby group, AirportsUK, contends the reforms will lead to a five-fold increase in business rates for Britain's airports from £350 million collectively currently to more than £1 billion annually.
Karen Dee, chief executive of AirportsUK said the sector can be a "real catalyst for economic growth across the UK" and contributes "more than £1 billion to the UK economy every week, almost a £100 million in UK air freight exports and more than a million jobs". Likewise, Mike Kane, the UK's aviation minister at the department of transport told the conference that "everything points to airports getting ready for a record-breaking 2025. We see airports teeming with confidence".
Most of the big UK airports are owned by a range of international investors, including Canadian pension funds, Australian retirement trusts, a Spanish infrastructure company, a French property and construction firm and sovereign wealth funds from Saudi Arabia and Qatar.
'Bucket of cash'
But while the gathered chief executives were enthusiastic about their growth prospects, they made clear they were unimpressed with the plan to revamp business rates as put forward by the Chancellor Rachel Reeves in her recent budget. "It's important we have a fair tax environment, and that's why we need to have the opportunity to solve this business rates issue solved at the earliest opportunity," said Stewart Wingate, the chief executive at Gatwick Airport, pointing out that his airport, which owned by the French company Vinci, faced a rise in business levies in the order of six times from the current £40 million annual charge. "We need to have investible conditions for our international shareholders and this threat of business rates is just not acceptable to us," he added.
Vincent Hodder, the chief executive of Leeds Bradford airport told the conference he feels the government looks at the aviation sector at the moment as "a bucket of cash that they can reach into and grab as much as they possibly can".
"The problem with that is that you are going to kill the goose that lays the golden egg," he added. "It is less attractive for infrastructure investors to invest in UK airports than it is for them to invest in airports in other parts of the world."
For Nick Barton, the chief executive of Birmingham airport, which faces a 400 per cent increase in its business rates after April 2026, the problem is the "political issues and noise that have been raised that have impacts on cost bases at airports that are currently quite disproportionate to the normal increase in costs that you would expect".
A recently leaked letter from AirportsUK to the Treasury said the reform of the business rates system would mean investment in airport assets "will decrease, routes to and from the UK will be lost (as can already be seen in Germany where taxes are rising), trade will be hurt, and British travellers will be hit with higher costs and less choice.”
Andrew Macmillan, Manchester Airports Group's chief strategy officer said the UK government was "struggling to co-ordinate, join up and actually have everything pointing in the same direction".
"Part of the next stage here, is how do we get the UK to be like some of those countries that really, really turn connectivity and their airports and aviation sector into a competitive advantage? Because given how connected we are as a country, that's what we need to do," he added.
For Jordan Cummins, director of competitiveness at the Confederation of British Industry (CBI) the government has "boxed themselves in" with the recent budget. "They just went too far, too quickly. They are also quite quickly realising that a U-turn would be quite embarrassing and so that usually entrenches even deeper. So, I don't see them going back on it," he added. "It was a mistake. Simple as that."
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