EMPLOYMENT GENERATION IN
CONTEXT OF SE AIRPORT
CAPACITY EXPANSION TO 2030
A Surrey Perspective
Martin Shenfield
BERKELEY HANOVER CONSULTING LIMITED (BHC)
SEPTEMBER 2013
1. INTRODUCTION
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•
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•
•
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The Airports Commission
Future SE Capacity Scenarios
Future Scenarios at LHR and LGW
Review Past Employment Trends
Forecast Employment Generation to 2020/30
Employment Implications to the Economy of
Surrey
Independent Transport Commission May 2013
“If the UK hub was to be either Stansted or a new Thames airport, we
believe that Heathrow would have to close as a major airport. This
would have massive implications for local jobs and businesses
depending on it. There would clearly be huge new economic
opportunities near the new airport, and Heathrow itself would be
attractive for business and residential development. But we believe the
Airports Commission needs to consider very seriously the implications
of the closure.”
“. . much of the economy of west London has developed around the
airport, while many global high tech companies have chosen to locate
in the wider Thames Valley Region. We believe that decisions on the
location of our major hub airport imply a stark choice. Either it
continues at Heathrow, or it finds an alternative new home elsewhere –
in our view, Stansted and the Thames Estuary look like the prime
candidates. In the event of a decision to develop a major hub airport
at either of those two locations, we do not see how the current
Heathrow could continue to operate.”
Are We Serious When We State that LHR
Could Close?
• “The complete closure of Heathrow has been assumed though in practice a small
airport could remain”. The Mayor of London’s submissions to the Airport
Commission for (i) Outer Thames Estuary (ii) Isle of Grain and (iii) Stansted
• New Hub “will only be viable if Heathrow closes as a commercial airport; and the
closure of Heathrow would, in our view, be unacceptable.” HoC Select Committee
• “No city has succeeded in starting up a second hub with the first in operation. This
requires closure, with compensation ” London Britannia submission, Testrad
• “The UK can only support one hub airport and the development of the Thames Hub
airport would require the closure of Heathrow” Thames Hub Airport,
Foster+Partners
• “However, a prerequisite for taking forward any proposals for a new hub would be
the closure of Heathrow. A four-runway hub Stansted would, however, require the
closure of Heathrow to be viable” Capacity for Growth, MAG
2. APPROACH
• Desk Research
• Review Statements by DfT, HAL, GIP, GLA, BA,
CBI, London First et al
• BAA/HAL and GIP Employment Surveys
• Review Other Studies
• Field Work
• Analysis
3. BHC VIEWS ON RUNWAY
SCENARIOS IN THE SE
The Core Scenarios
• De minimis
• Maximize Existing Infrastructure
• New Runway(s) at Existing Airports
• New Airport Development (NAD) in SE
The Possible LHR Scenarios (and
International Hub Retention)
1.
LHR2 with maximize best use of existing infrastructure (mixed mode) (YES);
2.
LHR3 and no new runways elsewhere (YES);
3.
LHR4 and no new runways elsewhere (YES);
4A.
LHR2 with additional runway at LGW (YES);
4B.
LHR2 with additional runway at STN (YES – MAYBE WEAKENED);
5.
LHR2 with NAD (UNLIKELY);
6.
LHR1 with NAD (NO);
7.
LHR0 with NAD (NO).
Is BA Important to the Mix?
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BA consolidating at LHR T5
2001 – 36% of ATMs at LHR
Slot Trading
Summer 2012 – 44% of ATMs at LHR
BA’s t/o of bmi
Summer 2013 – 51% of ATMs at LHR
Statements by BA
If LHR expands further consolidation by BA
Conclusions on Scenarios
• Scenario 1 (status quo - acts as a base case
scenario)
• Scenario 2 (LHR3 Expansion)
• 4A (LHR2 and LGW Expansion)
• 7 (NAD)
• Can it work if BA moves?
• Would it result in the short to mid term
degradation of LHR as hub airport?
• Would it result in eventual closure of LHR?
4. NATURE OF EMPLOYMENT
IMPACTS
How LHR Influences the Surrey Economy
Catalytic/Inward
Investment
LHR
Direct on
airport
Airlines
HAL
Cargo/Freight
Retailing
Catering
Car parking
Hotels
Security etc
Direct offairport
Indirect
Employment
Induced
Employment
Hotels
Cargo/Freight
Airline services
Car parking
Couriers
Employment
derived from the
goods and
services
procured by the
firms carrying
direct on- and
off- site
activities
Employment
created by
locally spent
income
generated from
the direct and
indirect
activities
Investmentgenerated
employment
Employment
generated by
companies
relocating to LHR
hinterland because
of international
connectivity in
sectors such as IT
&
pharmaceuticals
The LHR Numbers (’000) – 2010/2012
Employment
Local
London
Rest of UK
Direct On airport
76.6
76.6
76.6
Direct Off Airport
7.7
7.7
7.7
Indirect
11.1
20.8
44.4
Induced
18.6
31.5
77.2
TOTAL
114.0
136.6
205.9
5. ON AND OFF AIRPORT JOBS
AND OPERATIONS AT LHR
AND LGW FOR SURREY
RESIDENTS
Note: This does not include catalytic impacts
The Numbers – LHR & LGW
On Airport Jobs (’000)
LAs
Spelthorne
Runnymede
Surrey H
Elmbridge
Woking
Guildford
Reigate & Banstead
Epsom & Ewell
Mole Valley
Tandridge
Waverley
TOTAL
LHR
3.9
1.5
1.3
0.8
0.6
0.5
0.4
0.3
0.2
0.2
0.2
9.8
LGW
*
*
*
*
0.1
0.1
2.5
0.1
0.1
0.3
*
3.1
TOTAL
3.9
1.5
1.3
0.8
0.7
0.6
2.9
0.4
0.3
0.5
0.2
12.9
The Numbers – LHR & LGW
On and Off Airport Jobs (’000)
LAs
Spelthorne
Reigate & Banstead
Runnymede
Surrey Heath
Woking
Tandridge
Elmbridge
Epsom & Ewell
Guildford
Mole Valley
Waverley
TOTAL
Total
In Employment LHR/LGW
Jobs
46.4
5.9
66.4
4.4
44.5
2.1
43.3
1.8
48.4
1.0
40.8
0.7
64.9
1.1
34
0.5
72.3
0.8
38.1
0.4
55.7
0.3
554.8
19.0
%
Dependency
12.8
6.6
4.8
4.1
2.1
1.7
1.7
1.5
1.1
1.0
0.5
3.4
6. CATALYTIC IMPACTS –
WHAT ARE THEY AND HOW
DO THEY OCCUR?
How Can We Understand These Factors?
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The Heathrow Effect
Previous LHR Research
Is There a LGW Effect?
Previous Catalytic Research
– “it should be emphasised that the economic catalytic contribution of air
transport to GDP is bigger than its combined direct, indirect and induced
impact” - The Economic Catalytic Effects of Air Transport in Europe, OEF 2002
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FDI
Inward Investment
Expansion and Retention of Existing Base
Other Hub Airports
What Type of Companies Are We Talking
About?
Air Products Plc
AIRCOM UK Ltd
Alfa Laval Ltd
Allianz Holdings Plc
BAE Systems
Balfour Beatty Engineering
Bam Nuttall Ltd
Berkeley Group Plc
BP International Limited
Bristow Aviation Holdings
British Gas Trading Ltd
Broadway Malyan
Centrica Storage Limited
Colgate-Palmolive (UK) Ltd
Compass Group Plc
Crest Nicholson Ltd
Dairy Crest Group Ltd
Dalkia Plc
Del Monte Foods
Ericsson Ltd
Esso Mobil Company Ltd
Friends Life
GlaxoSmithKline
Consumer Healthcare
IBM UK Ltd
Kellogg Brown & Root
Kerry Foods Ltd
Kimberly-Clark Europe
McLaren Group Ltd
Menzies LLP
Michael Page International
Mobil Trading
Mondi
Mouchel Group Plc
Novartis UK Ltd
Pfizer Ltd
Philips Electronics UK Ltd
Procter & Gamble UK
Note – All based in Surrey
PUMA United Kingdom
Qinetiq
SABMiller
Samsung Electronics
Santander Consumer (UK)
Sony UK Limited
Spectris
Syngenta
Toshiba Information
Systems (UK) Limited
Towers Watson Ltd
Unilever UK Ltd
Verbatim
W.S Atkins International
Wates Group Ltd
Western Digital (UK) Ltd
Yahama
How Many Surrey Based Companies
Actually Fall Within This Group?
• A list of at least 250 firms based in Surrey that
exhibit some distinct aspects of catalytic impacts
• Employ between 50 and 7,000 staff in Surrey
(obviously not all residents)
• Considerable journey-to-work of Surrey residents
to international companies down M3 to northern
Hants and along M4 Thames Valley
• Without major surveys impossible to accurately
gauge the extent of catalytic impact
• …and how would the different airport scenarios
impact these companies?
OK So Give Us An Idea of the Scale of
Impact on These Companies!
Scenarios
S1
S2
S4A
S7
Very Positive
Positive
Neutral
Negative
Very Negative
Existing
Companies:
Retention
Existing
Companies:
Expansion
Inward
Investment
S2 and S7 Impacts
•
S2
• LHR with 3 runways will maintain global position as lead international hub
airport and enhance the regional competiveness advantage for inward
investment as well as facilitate expansion of existing international companies
• Encourage the expansion key high value added sectoral clusters in IT,
pharmaceuticals, communications, knowledge-based business services etc
• An unambiguous sign to global players that the British Government supports
expansion in the region around LHR
•
S7
• An unambiguous sign to global players that the British Government is
attempting to direct investment from west of London to east of London
• Existing UK and international companies in Surrey will consider relocation to
locations near to new airport in addition to sites near other hub airports such as
Schiphol, Frankfurt, Paris and Dubai – this will not only result in a local loss
of jobs but would negatively impact on UK plc
• Those companies who stay may consider expansion elsewhere and/or diminish
local operations
• Above-mentioned local clusters particularly affected and would result in
knock-on impacts to local/regional specialised supply chains
OK so S2 and S7 are Obvious but Explain
S1 and S4A!
• S1
• LHR will be full by 2020/2025 leading to the airport crowding and
the region losing competitive advantage against other European
regions that provide international hub facilities
• Existing companies maybe deterred from expanding locally and
potential FDI may locate elsewhere
• S4A
• The expansion of LGW will be of benefit to some companies located
in East Surrey particularly Reigate & Banstead
• Over 6% of locally economic active in R&B are currently
directly/indirectly dependent on LGW
• There could be some movement of point-to-point airline traffic from
LHR to LGW relieving pressure on LHR
• There is a possibility that one of the alliances would move from LHR
to LGW
7. FORECASTS
Employment Impact in Surrey (000 jobs)
120
100
80
60
40
20
0
2013
2020
S1
2025
S2
S4A
S7
2030
8. SUMMING UP
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LHR is a major overall generator of employment on and off airport for Surrey
Residents –accounting for in excess of 12% of the local workforce in Spelthorne
and some 3% in Surrey overall
Clearly the local workforce based in Spelthorne is highly dependent on LHR with
a likely scale dependency in excess of 30% with the catalytic impacts
Runnymede and Surrey Heath are the other local authorities that have high LHR
dependencies with catalytic impacts (above 10%)
LGW is a significant generator of employment in Reigate & Banstead
Overall, LHR/LGW provide 3.4% of jobs to Surrey residents but this
increases to some 12/15% once the catalytic impacts are taken into account
The closure of LHR (S7) would be a major economic blow for Surrey. Indeed,
even the status quo LHR (S1) would result in a long-term loss of in excess of
15,000 jobs – equivalent to over 3% increase in unemployment rates. In particular,
the impact on Spelthorne, Runnymede and Surrey Heath would be highly
challenging
Increasing runways at either LHR (S2) or LGW (S4A) would facilitate significant
additional economic activity leading to an increased demand for labour in Surrey
and its environs