The Infrastructure Debate: A Look at Connectivity, Housing, Commercial Development and Brexit

The Government have made their decision for a third runway at Heathrow. With huge support for an expansion at Gatwick from Sussex businesses and MPS, SBT takes a look at some opinions in the community as well as discussing the wider infrastructure climate around the Gatwick area. We talk housing, Brexit, the digital economy and connectivity with expert voices from NatWest and Gatwick Diamond Business

It’s been a hot-topic of debate for over a year now; Heathrow vs. Gatwick. Now, after decision-making has been prolonged, pushed and avoided for so long, we finally have our conclusion: Heathrow is to have a third runway.

The Government’s decision follows the unanimous and unambiguous recommendation of the Airports Commission last summer after a two and a half year, £20m study. The Commission had previously confirmed that expanding Heathrow would have the biggest economic benefits for the UK and can be done while reducing noise for local communities and in accordance with EU air quality law. So, the winning ticket goes to Heathrow.

Contrary to the Commission’s beliefs, and now to Governmental decision, an expansion at Gatwick seemed to be supported by the majority in Sussex, with businesses and MPs deeming it as a move in the right direction for the economy, and acting as a catalyst for improved international relationships. The Sussex Chamber of Commerce has released various statements over the past year regarding the decision, as have MPs across the county, business owners and locals to the Gatwick area. The Chamber’s most recent announcement was one of unbiased relief – a decision made creates a level of certainty that simply wasn’t there for businesses in both the Gatwick and surrounding Heathrow areas. The Sussex Chamber stated:

“Last December, the Sussex Chamber of Commerce commented on the Governments decision to delay a definitive choice for at least 6 months. The announcement that Heathrow was the ‘airport of choice’ came under scrutiny for environmental concerns, with the airport already operating outside the legal limit on emissions. Todays decision could come with further setbacks; the runway will take more than a decade to be built, with legal cases and consultation prior to MP’s voting next year contributing to further delays.

“It is incontestable that the UK sorely needs to expand airspace capacity; hopefully the Governments choice to build at Heathrow will give businesses in the South the opportunity to finalise plans put on hold by the drawn out decision.”

Adam Marshall, Director General of the British Chambers of Commerce commented: “Put simply, it’s about time. Successive governments have prevaricated for far too long in the face of a blindingly obvious need for more runway capacity. Businesses will now want assurances that the final approval process for Heathrow’s new runway will be smooth and swift, so that construction can begin as soon as possible.”

He added: “Building this runway will not only boost business confidence, it will also help firms access export opportunities, and attract investment from both UK and overseas businesses.”

“For business communities around the rest of the UK, connectivity into an expanded Heathrow is critical, even as regional airports develop their own links to overseas business destinations. This new runway must be viewed as much about connecting the regions and nations to the world as it is about capacity for London and the South East.”

However, David Sheppard, Chairman of Sussex Chamber of Commerce didn’t seem so enthused by the decision: “The Sussex Chamber of Commerce, and many businesses in Sussex are disappointed the decision wasn’t made in favour of Gatwick with its clear economic benefits to the region. One new runway is not enough to give the UK the aviation capacity it requires to trade the world successfully. Airports like Gatwick, Birmingham, Stansted, and others with growth aspirations should also get the chance to expand and grow in the future.”

Caroline Ansell, MP for Eastbourne and Willingdon also expressed her disappointment: “I am very disappointed the Government has approved expansion at Heathrow and not at Gatwick. Despite this, I remain convinced Gatwick is more deliverable, more sustainable and more affordable and I will continue to campaign for it to expand while there remains uncertainty over a third runway at Heathrow, given the opposition it faces.

“The fact is we need to build airport capacity at pace, especially post-Brexit, and the country needs to get into the habit of future-proofing its infrastructure, not just reacting when the situation is urgent. We need to tell the world we remain open for business and I believe increased capacity at Gatwick will do that.”

Supporters of the Gatwick expansion seem to be holding strong on their views, and with the government’s say only an initial announcement at this point – an official vote is yet to come – the plans maintain their strength and deliverability.

Gatwick Airport’s Chief Executive, Stewart Wingate said: “We are disappointed as we do not believe this is the right answer for Britain. Gatwick has put forward a credible financeable and deliverable plan for expansion.

“It is a plan that can guarantee growth and guarantee certainty for Britain. We look forward to studying the full reasons behind the Government decision in detail. The challenges facing Heathrow have not changed.  Our message today is that Gatwick stands ready to proceed when the time comes.”

Heathrow, of course, welcomed the Government’s decision to support its expansion, and have announced that they will ‘begin work to deliver the new runway that will connect all of Britain to the world, bringing new jobs and economic growth to every nation and region of the UK’ – as their most recent statement reads.

A Heathrow spokesperson said: “We welcome the news that Heathrow is the Government’s preferred site for a new runway and look forward to hearing the full details later from the Transport Secretary.

“Expansion of Heathrow is the only option that will connect all the UK to global growth, helping to build a stronger and fairer economy. We await the full details, but Heathrow stands ready to work with Government, businesses, airlines and our local communities to deliver an airport that is fair, affordable and secures the benefits of expansion for the whole of the UK.”

When it opens (due in 2025) new airport hub capacity will allow up to 40 more long haul destinations, apparently making Britain the best connected country in the world. However, there are concerns within the south east business communities that this ‘hub’ of connectivity may infringe on other airports in Britain, for instance making Birmingham, Manchester, Stansted and even Gatwick not only less desirable for travelers but also less able to offer flights to the best of their ability.

Ahead of, and in addition to our usual roundtable events in association with NatWest, we caught up with Jeremy Taylor, Chief Executive of Gatwick Diamond business, and Daryl Gayler, Regional Director for NatWest, London and the South East and on the Coast to Capital LEP to discuss Sussex’ status as ‘open for business’. First, we found out what their views were on the airport expansion debate, unknowing of the outcome, and how this decision could potentially impact upon the overall infrastructure climate. Then in true roundtable fashion, we discuss the more far-reaching infrastructure and connectivity issues affecting Crawley and the wider Sussex region, housing affordability and of course the potential outcome of Brexit: what uncertainty looks like in Crawley.

Jeremy Taylor, Chief Executive of Gatwick Diamond Business – the region’s largest independent business membership organisation. Jeremy is also the Director of the Manor Royal Business Improvement District (BID).

Daryl Gayler, Regional Director for NatWest bank, London and the South East. Daryl also sits on the executive board of the Coast to Capital LEP – a local enterprise partnership with Gatwick Diamond Group.

So by the time this is released, the government will have made its decision on whether it will be Gatwick or Heathrow for expansion. What are your thoughts?

Jeremy: From what everyone is saying, and the murmurs around the area, the decision is likely to be Heathrow. Politicians tend not to surprise us too much anymore; if we look at Autumn Budgets and Statements there’s never any surprise in there. So if the government does decide Heathrow, then we are just wasting time and effort. There’s been suggestions of tunnels and bridges to compensate for the expansion. There’s also the fact that there will be MPs resigning and councils challenging the government, though I think the government would be wise to say they will look at Heathrow but in the meantime Gatwick should get on with the planning; how they will fund it and what the impact is on the local infrastructure. When the government makes the announcement, it will lead to a 3 month consultation and the big thing that we must have in consultation is the impact on the ‘losing’ airport/area. If they say it’s Heathrow, we ought to be looking closely at what the impact is on the development of Gatwick and the south east. That’s not just an economic impact, that’s environmental as well because what seems to have passed people by is that if Heathrow does get a third runway, it will have an impact on Gatwick’s airspace. The planes that are going in and out of Gatwick will be lower, therefore increasing the issue of noise levels, due to Heathrow traffic above. We will probably get more demand in the night period too. So, even if it is to be Heathrow, there will be a significant negative impact on the Gatwick area, particularly for residents. I would hope this would be properly explored. If they were to decide Gatwick, we’d be cautiously delighted. One of the things we need to make sure of is that local authorities, who will have to deal with the planning and infrastructure, are properly resourced.

Daryl, from your own standpoint, do you think that the decision will bring a certainty that people are craving?

Daryl: I’m not sure the decision will bring much certainty. Either way, we’re waiting 9-10 years before we get a second runway whichever way it goes. We shouldn’t lose sight of the fact that there’s a compelling business, let alone leisure-related need for increased capacity. Having lived and worked in this area all my life, I’ve seen the growth of Gatwick and the way in which Stewart Wingate has improved it, so it would be a real shame if Gatwick wasn’t encouraged to pursue its plans. The structure of what they’re looking to do – the funding, the impact it would have on the local community, the opportunity to boost the economy etc. – is such a good story for Gatwick, so it would be a real shame if Heathrow were given the go-ahead at the detriment of Gatwick. Even if it was a phased introduction, I would like to see the expansion go ahead.

Jeremy: In terms of value to the country, one of the things that’s really important is that the common ownership of the two runways in Gatwick is anti-competitive. So to then put a third runway at Heathrow becomes anti-competitive because they’ll have so much market power in one place, making it difficult for any other airport. In addition, the large amount of the air quality gain that Heathrow claim is based on the fact that no one else can grow. So it doesn’t mean that Heathrow will affect the air quality less, it just means that they’re taking up more and more of the national total – so other airports will struggle. Gatwick itself can grow, stay within the legal limits and have a much smaller impact on air quality, which allows places like Birmingham, Newcastle and Manchester to continue to grow as well as giving resilience to the network; with two runways at Heathrow, two at Gatwick and one at Stanstead, plus one just down the road, you end up with three airports serving the city. If one is affected by, for example weather, then you have others to pick up the service. If there are three runways at Heathrow and there’s an issue, there’s no capacity at Stanstead to pick up the slack. It’s very much a case of putting all your eggs in one basket.

So the area around Gatwick Diamond has one of the lowest unemployment rates in the UK. What would you say are the main challenges for the region to maintain this whilst also growing?

Jeremy Taylor: It’s a double-edged sword actually. I can remember in the 90s, Crawley was reported as having the fastest growing unemployment in the country. The issue for Gatwick Diamond is around the ability for people to live here because it’s a quite expensive area – although not as expensive as London – and cost of housing is quite high relative to average wages. In addition, gaining value for money with housing is an issue, and it’s a problem for employers to find and keep people in the area. That may change, depending on what happens when we leave the EU, as we have quite a large migrant population living and working in the area. One of our members is in transport logistics and distribution – they have around 200 staff, 80% of whom are EU nationals, so obviously they’re wondering about what Brexit actually means and how that affects their rights to live and work here. Having said that, I understand that by the time we get around to Brexit in its fullness 80% of that migrant population will be eligible to stay working. It is an ongoing challenge to attract and keep the right talent for the area.

Are you sensing optimism or pessimism from customers about Brexit, Daryl? 

Daryl Gayler: I don’t think its optimism, unless you’re an exporter, but I wouldn’t say however that at this stage it’s absolutely pessimism either. There’s a little bit more ‘wait and see’ at the moment; people are uncertain about how the situation will play out and how quickly it will play out. I think the biggest concern I have is that we’ve perhaps beaten ourselves up in a fit of depression. If confidence lapses then I think investment decisions could get put on hold, which is a large concern. Some of the investment decisions that were being spoken about or even made, and the growth plans and acquisition activity will be deferred or put on hold, and then eventually will just disappear. At this stage, I’m not sure anything changes day-to-day, but it’s a bit more about what’s going to happen in the next 12-18 months. The confidence levels are the most concerning.

Jeremy: I think it’s a very fair comment. We can talk ourselves into a spiral and we need to be mindful of that. There are two things here: one is that the local economy is almost following two tracks. On one track you’ve got global exchange rates and the possibility of tarrifs, and the confusion happening in Brussels; then on the other track you’ve got a variety of businesses who are thinking they might not make payroll, not knowing what’s going to happen in November, how they are going to cover the Christmas break, how they will get to the end of March for the end of the financial year and will they know by January 2017 what the negotiation is going to look like?

The other thing that’s quite interesting is the attitude of business owners as well. We obviously had the crash in 2008, and life became very difficult. One of the things that I believe – but I try not to say too often – is that a downturn is good for organization. People need help and people need to be in a room of businesses talking to one another; they need to be getting out and talking about products and services. In the times when you open the door and the work simply comes in, networking and getting advice and support is less needed. That drive people get from a financial downturn or difficult time makes a big difference in business; having it a bit harder than usual pushes people to go out and do, to find something.

Daryl: I think it definitely depends on the sector. If you’re a manufacturer looking to do your export activity, then the short-term impact has been pretty positive. If you’re someone who imports a lot of raw material, then suddenly the cost of production has gone up by 10 or 15 per cent and it has an immediate impact if you can’t pass that onto the customer. So there’s definitely some immediate financial impacts, and looking at some of the other sectors, for example Kent-based fruit growers, who have routinely brought in a lot of European labour at peak times, the question is how long are they going to be able to source that labour? Same with the construction sector also. Elsewhere, I believe it’s essentially business as usual.

Jeremy: Talking about migrant labour – and this is one of the things that hasn’t really been touched on – someone coming over from a European country, who was earning a living wage that was worth 1.29 Euros to the pound, now is suddenly only getting around 1.09 Euros to each pound. So immediately the pound is far less attractive. We do get a large amount of people come here to earn some money, but as soon as you lose that much in the pound due to currency changes, there poses a problem.

Daryl: There is also the challenge that, when you try to find accommodation in this area, it’s not easy. So there’s definitely a shortage of local, affordable housing, therefore you’ve got people commuting, which isn’t cheap and it’s putting pressure on logistics – people getting in and out of the area. That’s a much broader challenge than just Brexit, but it does highlight the difficulties when people want to work and live here.

Jeremy: A few years back there was talk of investment modelling regarding the decision people make about commuting. For the Kent commuter, it’s not worth their while, financially or in time, to commute down here. They’re better off going North West into London. The wage differential and the time it takes is not significantly beneficial enough not to. For the Sussex commuter, London is a bit of a problem unless you’ve got a particular skillset, but Gatwick is in fact a good balance between what you can earn in, say Hastings, and that hour journey. That is if the train runs on time.

Croydon are very supportive because they’re building massively in terms of units and they see that people could be quite willing to go against the flow and come into the Gatwick Diamond area. The other thing is the amount of daily outflow that we have. Crawley attracts people in but the Gatwick Diamond itself have around 30,000 people a day travel out of the region and work elsewhere.

What could we do to grow the jobs that keep them here, and therefore minimise the amount of commuting that needs to happen, so improve quality of life?

It sounds as though there are a few planning strategies going on that almost conflict with each other. How can we tackle the affordable housing, firstly?

Jeremy: Manor Royal had successfully got an exemption from turning office space into residential, and then we heard 2 weeks later that the government has a proposal that you can turn warehouse and distribution space into residential, so we had to go through the whole process again to apply for an exemption. It has had a knock on effect; it’s had a big impact on available space, particularly in Crawley, Horsham, Horley, Haywards Heath and East Grinstead, and it’s getting that balance. The way it can be balanced is through things like the North Horsham development, which has got employment land, then the other side up towards Horley, which Reigate and Banstead are leading on, which would be about 150 acre business park of high-end business accommodation. The challenge on employment land is going to be around warehouse and distribution space.

Daryl: Housing has been an area that Coast to Capital has steered clear of for a while because it’s so politically charged and a difficult one to crack, but certainly it’s an area that we’re keen to have a view on. We’ve got a separate housing task force that was set up by Jonathan Sharrock, our Chief Executive, which will report back to the board in a couple of months or so. This includes a variety of people from all walks of life: house builders, housing associations, planning authorities and people with experience in that area. The take away from that will almost certainly be that there’s a shortage, but it’s a case of how creative we’re prepared to be in filling that gap. Converting existing property isn’t the only answer. Business needs to actively expand. There are various projects under way, but it needs to be something we’re working on year in and year out because there’s no denying that there simply isn’t enough affordable housing.

What issues do you see affecting businesses specifically in Crawley?

Jeremy: I think this lies in digital. Crawley has fantastic intellectual property, some great manufacturers, engineers and research and development. We also have a growing digital economy, and one of the issues for the area is how we capture ourselves as digital. One of our members moved out of the Gatwick Diamond area recently to Brighton purely because the talent that they need wants to work there. That’s a challenge for the region; we could embrace digital more – it would be lovely to have ultimately total wifi in Manor Royal. Superfast Broadband is no longer quick enough, but we’ve got it. In Chichester, we’ve got this digital tech hub being built by the university and a company in Horsham is doing hugely creative things with gaming platforms. So we have the means, but we just need to really get going with driving the tech startups in this area.

So Chichester is a digital hub, as is Brighton, so the issue here may be connectivity?

Daryl: There are plans afoot, I think for the Brighton mainline – plans for an upgrade. The idea is that the level of connectivity between Brighton and London needs to be improved. It’s quite a fast service though and would be easily improved by taking out some of the small bottlenecks. The issue though is the east-to-west connectivity I think, whether that’s the M25 or A27 going east to west. There are huge issues with joining up Eastbourne and Hastings with Chichester and that’s not an easy one to fix.

Jeremy: There are a lot of people on that route who want a faster journey, but don’t want the issues that come alongside the infrastructure – they don’t want a motorway running next to their house or the hassle of the build. Which I totally understand, but one can’t come without the other.

You both work closely with bringing businesses together (a ‘stronger together’ attitude). How do we go about continuing that, especially with so much uncertainty, to improve the issues we’ve discussed?

Jeremy: I think the main message for businesses is to belong and be involved. We have a fantastic voice in Gatwick – we mobilise 35 regional organisations, representing around 50,000 employers, writing into the Prime Minister about why we support Gatwick expansion on a regular basis. That’s a very strong voice to have and, that’s just one example, but we need the business community to join in with our ventures. I’m always very keen to say to my members that they need to tell me what they think, what their opinions are so that we can act on it. Plus, we can connect businesses in ways that they don’t really understand till they ask – we put organisations together, which leads to the most wonderful things happening.

Daryl: That’s certainly something we’ve spent more time thinking about – how we capitalise on the size of the portfolio that we have. We’re working with around a third of the SME corporate market, so we’re trying to create a platform for businesses to work together and feed ideas off each other. We are running a lot more events around sector themes, rather than purely economic in nature, creating thought-leadership material and allowing business leaders to come together in a relaxed environment and talk about the important topics that they’re facing in their industry and sector. People have certainly appreciated us doing that, and I think it’s the same with the Local Enterprise Partnerships – there’s a role for LEPs to provide that glue that connects the private, public and local sectors with the small, medium and large businesses. Suddenly when these people come together, projects that simply wouldn’t have happened actually do happen. It’s all about joining people together, whether it’s the banks, the LEPs or Jeremy’s organisation. It’s a shame that it doesn’t always happen.

 

Look out for the upcoming video of this discussion on the SBG website, and why not check out the November issue of Sussex Business Times? https://issuu.com/lifemediagroup/docs/sbt_406_2016