Aviation industry generates £52bn a year for the UK economy, new study finds

Out-Law News | 11 Nov 2014 | 2:30 pm | 2 min. read

The UK aviation sector contributes £52 billion to the country's economy each year, according to a new study.

The overall £52bn contribution that the UK aviation sector makes to the UK's gross domestic product (GDP) can be broken down into three elements, the Oxford Economics consultancy has said.

"This total comprises: £22.3 billion contributed through the output of the aviation sector (airlines, airports and ground services, aerospace) itself; £16.7 billion indirectly contributed through the aviation sector’s procurement from its domestic supply chain; and £12.9 billion contributed through the wage-financed spending by the employees of the aviation sector and its direct supply chain," it said in its new report on the economic benefits of air transport in the UK.

The report details how the aviation industry enables businesses to boost productivity and growth by providing connectivity between business centres around the world.Oxford Economics said that the aviation sector supports 961,000 UK jobs, either directly within the industry itself, the wider supply chain or "through its payment of wages which stimulates consumer spending". It said £8.7bn of taxes is generated for the UK Treasury each year in the aviation sector, through tax paid by businesses and employees in the sector as well as in air passenger duty, which on its own contributes £2.9bn annually to the Treasury.

The UK aerospace industry on its own supports 327,000 jobs, including 241,000 jobs with aerospace manufacturers or the industry's supply chain, and contributes nearly £20bn to the UK economy each year, it said.

According to the report, foreign tourists that travel to the UK by air help generate £19.6bn for the UK economy a year. Their spending supports 477,000 jobs, it said.

"Improvements in connectivity contribute to the economic performance of the wider economy through enhancing its overall level of productivity," the Oxford Economics report said. "This improvement in productivity in firms outside the aviation sector comes through two main channels: through the effects on domestic firms of increased access to foreign markets, and increased foreign competition in the home market, and through the freer movement of investment capital and workers between countries."

"Improved connectivity gives UK-based businesses greater access to foreign markets, encouraging exports, and at the same time increases competition and choice in the home market from foreign-based producers. In this way, improved connectivity encourages firms to specialise in areas where they possess a comparative advantage. Where firms enjoy a comparative advantage, international trade provides the opportunity to better exploit economies of scale, driving down their costs and prices and thereby benefiting domestic consumers in the process," it said.

The aviation industry also helps to open up UK markets to foreign competition which can help encourage innovation in production, it said.

Planning and aviation expert Jonathan Riley of Pinsent Masons, co-sponsor of the Oxford Economics report and the law firm behind Out-Law.com, said: "This report confirms the magnitude of the contribution made by the aviation sector to the economic well-being of the entire UK. It emphasises that connectivity creates exponential economic growth. To maximise the opportunity aviation presents, both to London and our regional airports, we need to improve government focus on, and funding for, the first and final miles of the journey to and from the airport."

"Whether flights carry freight, friends and family, foreign tourists or investors, the attractiveness of the UK as a destination depends on smart, swift and sustainable surface access," he said.