Government approves expansion of London's Heathrow Airport

The UK government has approved the expansion of London's Heathrow Airport, though Tuesday's decision to give the green light to construction of a third runway is expected to face extensive consultation and possible legal challenges.

The Economic Affairs Transport sub-committee, led by Prime Minister Theresa May, backed the addition of a new runway for Heathrow and said the scheme will be taken forward in the form of a draft ‘National policy statement’ for consultation beginning in the new year.

Transport secretary Chris Grayling said: "The step that government is taking today is truly momentous. I am proud that after years of discussion and delay this government is taking decisive action to secure the UK’s place in the global aviation market – securing jobs and business opportunities for the next decade and beyond.

"A new runway at Heathrow will improve connectivity in the UK itself and crucially boost our connections with the rest of the world, supporting exports, trade and job opportunities. This isn’t just a great deal for business, it’s a great deal for passengers who will also benefit from access to more airlines, destinations and flights."

Grayling said the committee, which had to choose between building a third runway or a runway extension at Heathrow or a new runway at Gatwick, backed the Heathrow extension only on the basis of a package of compensation and mitigation worth up to £2.6bn, including "community support, insulation, and respite from noise" to try and balance the benefits and the impacts of expansion.

Heathrow faces opposition

The cabinet is reportedly divided over airport expansion, with education secretary Justine Greening and foreign secretary Boris Johnson opposed to a third runway at Heathrow.

Reports in the Telegraph overnight indicated the foreign secretary would re-open new rifts in the cabinet by opposing Heathrow expansion plans, having drafted a statement that will argue the decision is a "mistake".

Fellow Conservative MP Zac Goldsmith was said to be on the verge of quitting in protest at the decision in order to stand as an independent.

Prior to ascending to her current role, the Prime Minister herself has campaigned against a third runway at Heathrow on behalf of the resident of her Maidenhead consituency due to concerns about noise and air pollution.

City expects boost

Analysts in the City said the decision could prove a major boost to the economy and certain companies, but fans of airport queue were warned by some experts not to get too excited as there is expected to be at least a year of consultation following Cabinet's decision and that's before then the effect of legal challenges is factored in.

"London businesses will welcome the decision by the government to add a new runway at Heathrow," said analyst Jasper Lawler at CMC Markets.

"It will be a multi-year boom for the businesses that win contracts to build and serve a bigger Heathrow. As far as blue-chip shares, outsourcing firm Capita is bound to be a huge beneficiary of a new Heathrow runway."

Neil Wilson at ETX Markets said the decision was a signal the UK is open to global trade post-Brexit and will be a major boost to the economy as benefits from the construction sector trickle down through the supply chain.

"Of course we are well short of a firm decision and there could yet be some turbulence for Heathrow to clear before ground is broken. A strong legal challenge could yet derail this project," Wilson said.

A new runway at Heathrow is expected to cost around £18.6bn, around double that for a new runway at Gatwick, while the government said it expected up to 77,000 extra local jobs would be created over the next 14 years with the construction process.

In 2016, 75m passengers were forecast to use Heathrow and it is currently operating at 99% capacity, with both airports handling 45% of Britain's passengers.