Is Britain losing £1.2 billion to other countries because of poor flight connections?

"Britain is losing up to £1.2 billion a year because of poor flight connections with emerging economies"

The Times, 19 January 2012

"A report last year found that Britain may be losing up to £1.2 billion a year due to a lack of direct flights to emerging markets"

The Daily Telegraph, 18 January 2012

"the UK could be losing £1.2bn a year because of inadequate connections to emerging economies like China and Latin America"

BBC News, 19 January 2012

With the Prime Minister apparently this week signalling that he will look at proposals to build a new airport in the Thames estuary - something the London Mayor Boris Johnson has long supported - the costs and benefits of aviation to the UK have found themselves in the media spotlight again.

In the current economic climate, the case for building a new airport seemed to get a shot in the arm this week as several media outlets reported that the UK economy was missing out on £1.2 billion through its failure to expand its flight capacity.

But where do these claims come from, and do they stand up to scrutiny?

Analysis

The Times traces the figure on the economic benefits of airport expansion to the Free Enterprise Group, a group of 34 Conservative MPs, whose report 'The Case for Aviation' argues that Britain is potentially losing up to £1.2 billion as a consequence of poor flight connections and a lack of direct flights to emerging economies.

The group claim this strengthens the case for building a third runway at Heathrow, arguing that the recently reported plans for an airport in the Thames Estuary would take too long to implement.

However the original claim that the UK may be losing up to £1.2 billion can be traced to a report published in September 2011 by Frontier Economics.

This report points out that Heathrow does not have direct flights with ten emerging economies: Mexico, Indonesia, Venezuela, Colombia, Chile, Philippines, Pakistan, Peru, Ukraine, and Vietnam. 

Initially, to measure the extent of potential trade with these countries as a consequence of direct flights, Frontier Economics compared the countries to other emerging economies to which there are direct flights. The results were then adjusted for the size of the economies, leading Frontier Economics to conclude that the UK could gain £17 billion in trade by having direct flights to these countries.

A similar method was used to calculate the potential for capital investment, which the report estimates to be approximately £12 billion. They conclude: "This basic analysis suggests that the UK could be missing out on as much as £29 billion a year of trade and investment opportunities with Growth and Emerging Market countries".

As Frontier Economics point out, this method assumes that the ten countries reach the same level as trade as other emerging economies. A better method would be to compare the UK with European countries which currently have direct flights to the ten emerging economies.

Frontier Economics used this method whilst taking into account the relative size of the European economies. As a result, they concluded that "even on our most conservative estimate Britain has the potential to increase trade by a minimum of around £1.2 billion a year".

Conclusion

Assuming Frontier Economics' calculations are correct, the figure reported is actually a conservative estimate, and the true value of the additional trade links could top £29 billion depending upon the rate of growth in the economies under consideration. It is also worth noting that the figure is an estimate based on calculations which compare other economies, rather than being based purely on the UK economy.

The number of assumptions in these calculations may also mean that the conclusions drawn may be speculative rather firm. While both the Telegraph and the BBC note that it is a sum that the UK 'could' be missing out on, the Times is more strident, claiming that "Britain is losing up to £1.2 billion a year" (emphasis added).

Full Fact has contacted Frontier Economics for more information on their calculations, and we will post an update as soon as we have more information.