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PRESS RELEASE

10 December 2012
Embargo: For Immediate Release

BUSINESS WILL FLY OFF IF AIR LINKS GET WORSE


The UK needs a long-term aviation strategy for international trade to flourish

Scotland is an outward-looking and enterprising nation. To grow our reputation and our markets, we must be ambitious about our place in the world and internationalise our businesses. This will improve export earning, attract more inward investment, support a skilled workforce and make Scotland an international centre of innovation.

To achieve Scotland's ambitions on the global stage requires access to a hub airport, connecting all parts of the country with international markets. At present the UK’s international hub is Heathrow Airport, connecting almost 200 destinations in 90 countries. Last year was the airport’s busiest year on record with just under 70 million people flying in or out of the airport – of these 65 million were travelling to or from the UK’s shores. Heathrow is an asset of strategic importance to Scotland as it is to the rest of the UK.

Access to a hub airport is a key competitive advantage in the battle to remain a centre of commerce, business and tourism in the global economy. Heathrow’s status as a major hub airport places the UK at the centre of one of the world’s largest international aviation route networks. For example, Heathrow’s links to North America are very important to the oil and gas supply chain in North-East Scotland – some companies have even suggested they would be forced to relocate from the UK if they did not have competitive access to these markets.

Heathrow’s large and growing passenger numbers and international status mask the primary challenge for UK aviation; the nation’s hub airport is approaching capacity and without expansion does not have a viable future as a hub. For more than four decades, the major countries competing with the UK for inward investment, tourism and exports have been progressively developing their airports. Germany, France and the Netherlands have all significantly increased their airport capacity with the construction of new runways, terminals and airports, while the UK has failed to deliver this much-needed new infrastructure. The cancellation of new capacity at Heathrow has allowed us to fall further behind our international competitors which is already causing damage to the economy. The time has come for government to act, protecting hub access for Scotland and progressing plans to increase aviation capacity.

At the same time as suffering from a lack of capacity, British aviation tax rates are the highest of any major European country. Aviation tax in the UK has increased sharply at a time of high fuel costs and economic difficulties, while other European countries have cut them. This undoubtedly places the UK at a further competitive disadvantage internationally and is inconsistent with plans to increase exports, inward investment and tourism. Research by York Aviation estimates the increases in Air Passenger Duty will cost Scotland £210m in lost tourism income per annum by 2016.

The UK is one of the world’s leading exporters and destinations for inward investment and tourism in an increasingly integrated global economy.  With domestic demand likely to be weak over the coming decade, the key challenge will be to rebalance the economy, with fewer resources devoted to consumption and more to business investment and net exports. The Scottish Council for Development and Industry (SCDI) believes Scotland has the potential to double the value of its exports by 2020. The Scottish Government has also set a target of export increases – to rise by 50% between 2011 and 2016. Many major Scottish export sectors including oil & gas, food & drink, tourism and chemical sciences have agreed export targets which, if achieved in these industries alone, will add £16bn annually to Scotland's economy. These sectors are united by a need for global connectivity in order to achieve their challenging, but economically essential targets, and will not deliver their international potential while the UK still lacks an aviation strategy.

Research conducted amongst SCDI’s membership demonstrates the vital importance of air links, particularly through a national hub. 98% of respondents stated that air connectivity was crucial or important in meeting customers. Two-fifths of businesses use aviation weekly to meet customers or for other business activities and air freight was either crucial or important to more than 50% of businesses. Of the UK’s top 20 priority high-growth markets – countries such as China, India, Russia, South Africa and Singapore – Scotland currently has direct flights to just four.

A number of organisations gave specific details on the true impact of aviation connections to their business. An oil and gas company planning billions of pounds of new investments said that reduced air links to London could affect their investment programme, whilst another business stated that consistently reliable flights to Heathrow are the cornerstone of their reasoning to keep the business based in Scotland.

Government policy should recognise that aviation is important to UK regions in different ways. Some airports are located in parts of the country with relatively short surface transport to London and the UK’s hub airport. Other airports serve regions, such as the north of Scotland, where air travel is, in some cases for the medium term and in others probably always, the only viable means for businesses to access London and Heathrow. Whilst Scotland’s airports are working to develop their own international routes – SCDI supports their call for the devolution of Air Passenger Duty if it is used to incentivise new route development – the size of the Scottish market means that we will always require connectivity with a hub airport. The UK Government’s aviation policy currently acts to restrict capacity in South-East England. But a major negative impact of its intervention falls outwith London as airlines switch slots for regional services to more lucrative long-haul flights. The vulnerability of these regional services has been seen recently with the loss of BMI’s Glasgow-Heathrow services and the long-term withdrawal of an Inverness-Heathrow link. Two-thirds of Glasgow-based companies researched by SCDI state that the loss of Glasgow’s BMI route has had a direct impact on their business. A UK-wide aviation strategy must ensure access from across the UK to the global hub is maintained and developed.

Scotland and the UK have much to gain from the development of an aviation strategy focused on driving economic growth through tourism, inward investment and exports. Our businesses are now looking to our politicians for action. And waiting until after the next election for decisions risks further damage to our economy.


Note to editors

SCDI is Scotland's leading independent economic development organisation
representing 1,200 companies, SMEs, public sector bodies, charities, trade unions and
faith groups.

For further information, please contact James Alexander, SCDI Policy and
Communications Manager on 0141 222 9728 or 07762 023 985.

 


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