A £2.5bn scheme to expand one of London’s leading airports is now facing uncertainty thanks to rising tax expenses. Luton Council, which operates under Labour leadership and owns Luton Airport, is currently planning to build a brand-new terminal and boost capacity from 18m to 32m annually by 2043.
However, the proposals, which have received governmental approval, could face threats from business rates modifications announced in last year’s Budget, with revaluations scheduled to take effect in April, according to City AM.
The airport is expecting to witness its business rate bill more than double by 2029, with HMRC payments anticipated to climb from just under £7m this year to £14.5m within three years, based on recent analysis. A retreat in investment plans from major airports would deal a setback to Chancellor Rachel Reeves, given the Labour administration’s reliance on significant infrastructure schemes to enhance productivity.
A statement from Luton Airport indicated any additional tax burden would be “likely to impact” investment choices as officials pressed the government to align policies with its commitment to supporting airport expansions.
The statement continued that it would continue to work with the government during an ongoing examination into business rates for airports alongside other industry representatives. The consultation is scheduled to conclude next month.
The substantial airport expansion remains planned to proceed. A spokesperson said: “With airport expansion at the heart of the Chancellor’s growth mission, it’s important that all Government policies align to support this ambition. Any additional tax burden is likely to impact future investment decisions, however we welcome the Treasury’s engagement on this important issue and as an industry continue to work with them as part of the long-term review into how airport business rates are calculated.”
Officials at Gatwick Airport revealed they were still examining the consequences of business rates potentially doubling to £140m by 2029, having previously warned in late October that any increase beyond 40 per cent would jeopardise investment plans.
The organisation described the consultation as “crucial” to ensure airports dodge the most severe repercussions of Reeves’ tax policies when the next revaluations take place.
A representative for Manchester Airport stated last month that it would “look again” at proposals to invest £2bn in its airports over the coming five years.
Karen Dee, chief executive of AirportsUK, said: “The Chancellor has staked the UK’s growth on airports, and while the changes to transitional relief announced in the Budget are very welcome, an increase in their business rates of over 100 per cent could still force some to review billions of pounds of transformational investments across the UK and potentially puts thousands of jobs at risk in the longer-term, This will obviously have a knock-on effect for the businesses that depend on airport connectivity in all areas of England, negatively impacting local economies that depend on the supply chains, tourists and connections their airports provide.”
Shadow transport secretary Richard Holden criticised the move, stating: “It tells you all you need to know that Labour are sticking a half a billion pound tax hike on airports just as they are being asked to invest, expand and compete globally. You cannot build a pro-growth economy while taxing the infrastructure that keeps it airborne. Labour’s tax policy is risking jobs and making flying more expensive, all to paper over the holes in their own economic catastrophe.”
A government spokesperson responded: “We’re delivering a £4.3bn support package to cap business rates bill increases at 30 per cent before other reliefs for the largest properties, including airports. Without intervention those would be up to 500 per cent.”
