Never has there been a more important time for Britain to show that it remains open for business.
The UK has been an open, connected economy since before Adam Smith wrote his Wealth of Nations in the eighteenth century. The prosperity to pay for the high-quality public services that we have come to expect depends fundamentally upon trade, exports and the world actively choosing to “do business” here. Among leading countries, only Switzerland, Singapore and the UAE – three nations incidentally that are all now offering airside testing for Covid – are more reliant upon international trade in order to maintain their own standard of living.
Aviation is therefore doubly important to the UK economy. It is a large sector, accounting for many high skilled and well-paid jobs. But even more vital is its role at the centre of British trade, carrying exports in the holds of the same planes that bring investors, tourists and students to the UK. Indeed, as the UK seizes the opportunities of becoming an independent trading nation again at the end of this year, this strategic importance will become even more pronounced, given the export ‘infrastructure’ that our aviation industry provides in supporting connectivity and routes with the rest of the world.
That is why a recent report from Airlines UK and York Aviation projecting a decline in the UK’s connectivity from the impact of Covid is so dispiriting. While a short-term decline is unsurprising given the reality of the impact of the pandemic on the sector – one major London airport closed and air passengers at some points down by 97 per cent – the persistence in decline is.
Forecasts show that from this December the UK is expected to see a decline in long-haul connectivity of over 40 per cent. For domestic connectivity, this is forecast at 35 per cent, and for short-haul, just under 20 per cent. Such a rapid clogging up of the arteries of Britain’s trade with the world should concern us all.
What the report also shows however, is that not all of this decline is inevitable.
The UK has a diverse and competitive aviation sector and the Government is rightly reluctant to try to pick winners or to second guess the motives of commercial businesses. Some airlines were facing challenges long before Covid.
However, one sector-wide lever available to the Government to help kickstart a recovery in aviation is to suspend the additional burden of Air Passenger Duty (APD). By waiving APD for a year, it is estimated around half the routes that would otherwise be lost could be saved, providing a very real boost to the prospects of the sector.
Under this scenario passenger demand would increase by around 12 per cent, equating to 21 million passengers against a baseline number of around 170 million. Such an increase would safeguard thousands of aviation jobs across the country including those of my constituents in Arundel & South Downs near Gatwick Airport in West Sussex.
Given the reduction in passenger volumes anyway, the cost to the Exchequer would be relatively modest and compensated for in the longer term by retaining a larger industry tax base that would otherwise be lost.
If suspending the headwind of Air Passenger Duty can do anything to help to get UK aviation – our key linkage and lifeline to the rest of the world – back on its feet sooner, then we would be remiss not to seriously consider it.