Belfast Telegraph

Heathrow upgrade is imperative for Northern Ireland to stay connected

The UK's busiest airport is a vital gateway to the rest of the world not just for mainland Britain but Ulster too, explains Hudson Institute's Dr Irwin Stelzer

Northern Ireland, not just London, suffers because of the UK's current connectivity crunch.

It is not true that economists are incapable of learning anything new, even when we have been mugged by reality. In recent months we have learned three important things.

The first is that overly indebted countries are doomed to a downward spiral if we rely on austerity alone to pay off our debts. Spending cuts reduce growth, which makes it more difficult to reduce deficits, which leads to more austerity, lower growth and ... Well, you get the picture. If not, think Greece, Portugal, Spain and Italy. Sensible budget reduction must come with measures to help economic growth.

Second, we have learned that increasing exports can be an important contributor to overall growth. In the US, half of the approximate 2% growth comes from an increase in exports. In Britain last year, the rise in exports made the difference between 0.9% growth and another recession.

Third, thanks to studies commissioned by the Mayor of London and BAA (whom I serve as an adviser), among others, we have learned that connectivity - the ability to connect with trading partners - is key to export growth. And also a key to much more. It is vital to increase tourism, to increase foreign direct investment and to maintain the UK's role as a leading financial centre. And that this is crucial for Northern Ireland's businesses as well as for those elsewhere.

Which is why it is so worrying that the UK is increasingly unable to connect with emerging markets. The world is changing and at an unprecedented rate. Wealth is shifting to India, China, Brazil and other emerging markets.

Meanwhile, my country, the US, is wrestling to maintain a modicum of growth and many European markets are in turmoil. The absence of growth in the EU periphery countries has morphed into severe recessions, financial stress and floundering political classes. Britain cannot look to the EU as a growing export market.

Which is where connectivity comes in. Heathrow airport is unable to realise its full potential because of regulatory restrictions on existing capacity and the commitment of all political parties to prevent the construction of a third runway. Regional airports are important. But their value depends in good part on the existence of a hub that can pool demand, providing sufficient traffic to support routes to important destinations.

Some day the UK may have one of the new airports that are now being proposed. But that some day isn't going to happen in this decade or the next, and perhaps never if the £50bn plus in required capital can't be raised from private sources - the taxpayers are out of cash, and unable to finance such a project.

As new research from Oxford Economics demonstrates, for the Northern Ireland economy to grow, a speedier solution to the connectivity crunch is required. Up to £1bn of Northern Ireland's exports move by air, 60% of them via a hub. One in 10 jobs in Northern Ireland depend on foreign investment - half of these via a hub. Around 1,000 Northern Ireland jobs in the tourism sector alone depend directly on Heathrow airport.

Frankfurt, Amsterdam, Madrid and other cities are providing new airports and runways, creating easy connections for investors deciding where to locate headquarters and factories.

Heathrow cannot now match those facilities. But unleashed, Heathrow can do more to keep Britain competitive. It can create capacity to keep connecting flights between Belfast, London and the world. And it can do it before new trade routes are formed that relegate the UK to the second division among trading countries.

If that happens, it will be considerably more painful to dig out from under the debt that now weighs so heavily on all of us.