The Economic Contribution of Aviation to the Uk: Part 2 - Assessment of the Regional Impact

THE ECONOMIC CONTRIBUTION OF AVIATION TO THE UK:

PART 2 - ASSESSMENT OF REGIONAL IMPACT

FINAL REPORT

OXFORD ECONOMIC FORECASTING May 2002 Acknowledgements

Like our earlier report on the Contribution of the Aviation Industry to the UK Economy, this follow-up report has been funded by a consortium of companies in the industry, together with the (now) Department for Transport, Local Government and the Regions. We are grateful for comments and assistance in putting the report together from a steering group comprising representatives of DTLR, BAA, Manchester Airport, Newcastle Airport, British Airways, the Airport Operators Association, and the British Air Transport Association. The views and analysis presented in the report remain those of OEF rather than those of the sponsoring organisations.

Oxford Economic Forecasting May 2002

2 THE ECONOMIC CONTRIBUTION OF AVIATION TO THE UK: PART 2 - ASSESSMENT OF THE REGIONAL IMPACT

OXFORD ECONOMIC FORECASTING

CONTENTS

Executive Summary Page 3

Introduction Page 5

I. What Does Aviation Contribute to Today’s Regional Economies?

(i) Employment in aviation Page 6

(ii) Aviation output Page 11

(iii) Employment dependent on aviation Page 11

II. The Importance of the Aviation Industry to Economic Growth in the Regions

A. The direct contribution of aviation to growth in the regions Page 18

B. The wider contribution of aviation to growth in the regions Page 24

C. The role of aviation in each region Page 26

III. Modelling alternative scenarios for aviation in the regions Page 35

Annex A – Supporting tables Page 39

Annex B – An example of the impact of different passenger numbers Page 50

Notes Page 54

3 Executive Summary

· In November 1999 Oxford Economic Forecasting (OEF) issued a report on ‘The Contribution of the Aviation Industry to the UK Economy’. This report presents the results of follow-up work OEF has undertaken on the regional breakdown of that contribution.

· In 1998, aviation directly provided 180,000 jobs in the UK, 0.8% of total employment. 40% of these jobs were in Greater London, where the industry accounted for 2.1% of all jobs. In regions outside the ‘Greater South East’ (London, the South East and Eastern region), where the various ‘London’ airports are located, the share of jobs provided directly by aviation varied from 0.7% in the North west to 0.l% in Yorkshire & Humberside.

· Aviation accounted for value-added of £10.2 billion in 1998, 1.4% of the UK total, ranging from an estimated 3.2% of London’s GDP and 1.8% of the South East’s, down to 0.2% of GDP in Yorkshire & Humberside, and 0.3% in the South West on the basis of our methodology.

· The benefit of direct employment is not felt just in the region where the jobs are located – looking at the allocation of jobs on the basis of where people live rather than where they work, aviation actually provides the biggest share of employment to workers who live in the South East, rather than those who live in Greater London.

· We estimate that indirect employment supported by aviation was 200,000 in 1998 over the UK as a whole. Our estimates suggest that it is more evenly distributed across the country than direct employment, since large airports in one region also support jobs through the supply chain in other parts of the country.

· Including ‘induced employment’ supported by the spending of direct and indirect employees, total aviation-related employment in 1998 ranged from an estimated 3.6% of all jobs in London and 3.3% in the South East, to 0.9% in Yorkshire & Humberside and in Wales.

· Assumptions about productivity trends at individual airports are very important to projections of the contribution aviation is expected to make to jobs in each region. Our main assumptions are based on the same rate of productivity growth in the industry in each region – in practice there are several factors that will affect productivity growth differentially across regions, but it is very hard to quantify these. On our base assumptions, direct employment in aviation is projected to grow from 183,000 in 1998 to 242,000 by 2030. The largest absolute increase in jobs is projected in the Eastern region, where 20,000 new jobs in aviation are projected, primarily as a result of high demand growth predicted at

4 Stansted.

· There may be substantial regional variations in rates of productivity growth, which could give rise to substantially different contributions to growth in different regions, particularly as airports reach critical mass enabling them to support a wider range of on-site and local support activity.

· Including indirect and induced jobs, total aviation-related employment is projected to rise by 240,000 between 1998 and 2030, to 2.4% of all jobs. By 2030, aviation-related employment is projected to be as high a share of total employment in Eastern region as it is in Greater London, in contrast to today when the share is around 50% higher. A similar increase is projected in the North West, though from a somewhat lower share, while all other regions outside London and the South East are also expected to see some increase in the share of employment accounted for by aviation-related employment.

· The contribution of aviation to GDP is projected to rise from 1.4% in 1998 to around 2% by 2015, before stabilising around that level as the industry matures and passenger growth is assumed to slow. Once again the biggest increase is expected in the Eastern region, where the contribution is projected to rise from 1.6% of GDP in 1998 to 3.1% in 2030. All other regions, with the exception of Northern Ireland, are also projected to see some increase in the share of GDP contributed by aviation.

· It is not just the direct contribution of aviation to regional economic growth that is important. Sectors seen as the main sources of economic growth, for example in regional economic strategies, are typically among the most dependent on aviation.

· Good air transport links are one of the important factors in encouraging inward investment into particular parts of the UK, as well as helping retain inward investment and high value- added activities that may be footloose if competitive advantage is being threatened. Within the manufacturing sector, foreign-owned firms have historically been most important to investment in Scotland, the West Midlands, the North East and Wales. However, developing and improving good air transport links will be equally important for regions that have been less successful in the past at attracting inward investment, whether to help attract additional inward investment or to improve the prospects for indigenous investment.

· More fundamentally, the aviation industry is part of the transport infrastructure on which many other parts of the economy depend, and the Part 1 national study revealed the role that improvements in transport infrastructure can have in boosting productivity growth across firms that can use it or that compete with other firms using it. We expect such effects to be strongest in those regions with the best links, both to other parts of the UK and to other parts of the world.

5 Introduction

In November 1999 Oxford Economic Forecasting (OEF) issued a report on ‘The Contribution of the Aviation Industry to the UK Economy’. This report presents the results of follow-up work OEF has undertaken on the regional breakdown of that contribution.

The rest of the report is organised as follows:

· Chapter I looks at what aviation contributes to today’s regional economies. This includes both the direct contribution of the industry to employment and output in each region, and also the support the industry provides to employment in other sectors of the regions’ economies that depend on aviation.

· Chapter II looks at the importance of aviation to economic growth in the regions. Once again it covers both the direct contribution aviation might make to employment and output, and also the wider contribution it can make to growth in the regions through its impact on other sectors.

· Chapter III describes work OEF has carried out to build a model of the interaction of aviation with regional economies. The model incorporates elements both of OEF’s existing Regional Model1 (which has also been used to project forward the economic structure and growth in each region against which the contribution of aviation is measured) and of the model OEF built as part of the earlier report to assess the impact of aviation on the economy at the national level. It is designed to allow an assessment of the overall potential economic effect on each region of alternative scenarios for the development of the aviation industry that may imply different regional concentrations of growth in passenger movements.

· Annex A contains the detailed results from which the summary tables in the report are drawn, while Annex B describes an example of the impact of different passenger numbers on the model built for scenario analysis.

Although the final version of this report is being released in 2002, the majority of the work was carried out in the months following our first report, and the figures presented here reflect the situation at that time. More recently, there have been adverse short-term effects on aviation in the UK from the impact of last year’s outbreak of Foot & Mouth Disease on tourism and from the impact of the terrorist attacks of 11 September on confidence in flying. But these events do not affect the validity of the medium and long-term analysis in this report and our earlier work.

6 I. What Does Aviation Contribute to Today’s Regional Economies?

Key points · In 1998, aviation directly provided 180,000 jobs in the UK, 0.8% of total employment. 40% of these jobs were in Greater London, where the industry accounted for 2.1% of all jobs. In regions outside the ‘Greater South East’ (London, the South East and Eastern region), where the various ‘London’ airports are located, the share of jobs provided directly by aviation varied from 0.7% in the North west to 0.l% in Yorkshire & Humberside (Table 1a).

· Including ‘induced employment’ supported by the spending of direct and indirect employees, total aviation-related employment in 1998 ranged from 3.6% of all jobs in London and 3.3% in the South East, to 0.9% in Yorkshire & Humberside and in Wales (Table 5).

Introduction In 1998, UK airports handled around 158 million terminal passengers. As might be expected, given the large airports concentrated around London, the largest proportion of travellers used airports in Greater London (39%), and the South East (19%). But the importance of the aviation industry is not confined to the south of the UK; 11½% of passengers travelled through airports in the North West, and 9½% through Scottish airports. Even though the total number of passengers travelling through other regions amounts to a smaller share of the total, this existence of a regional aviation industry still makes a substantial contribution to local economies in terms of employment, with an average of around 1 job created for every 1000 passengers using an airport. Employment at a number of smaller airports benefits from the siting of maintenance facilities that service the aircraft carrying passengers at larger airports.

(i) Direct employment in aviation

The study conducted for Part 12 showed that nationally there were 180,000 full-time equivalent workers employed directly in the aviation industry in 1998 - that is, in jobs wholly dependent on airport-related activities, so called direct employment. This number, some 0.8% of total UK employment, means that aviation employs similar numbers to motor manufacturing, hotels or telecommunications services. The national figure was constructed by looking at employment studies from individual airports, which gave the

7 numbers of direct employees associated with each major airport. Employment at smaller airports not covered by individual employment surveys was assumed to be proportional to the number of terminal passengers handled. The numbers for different airports were then aggregated to give a national total.

When looking at direct employment at a regional level, our starting point is simply to aggregate the airport figures to regional totals rather than a national total. However, a complete explanation of the economic impact of regional aviation requires the data from the individual airports to be examined in a number of different ways:

· The first breakdown tells us the region where the jobs are actually located and is recorded in existing airport studies. This breakdown by workplace is the key to aviation’s direct contribution to economic activity and employment in a region. It is also used as a starting point for estimating how much indirect employment is created in supplying goods and services to each airport.

· The second way of looking at direct employment is by making the distinction between workplace and residence. Usually the two coincide, but there are several important cases, notably in the south of the UK, where workers travel across regional boundaries to reach their place of employment. The region of residence of workers is important both because it affects the impact aviation can have on unemployment rates in an area, and also because it will typically determine where induced employment will be created.

· But this information on its own does not give a complete picture, because although generally, the region of employment will be the region where the airport is located - most direct employment takes place on the airport site or in the area immediately adjacent to the airport site - there are a number of instances where a proportion of the jobs recorded in an airport study of on site employment depends on activity in another region. Several significant examples of this are addressed below. It is important to identify these cases, to ensure that the linkage between aviation activity and employment in different regions is properly captured in the model presented later.

Table 1a shows the outcome of adopting the first approach to examining direct employment by region. It gives the workplace of direct employees, regardless of the region responsible for generating the economic activity that provides that job, together with the percentage of full time equivalent jobs that the direct employment in the aviation industry is providing in each region.

8 Table 1a. Direct Employment. 1998 (by workplace) % of total % of UK regional direct aviation Direct employment employment South East 34400 1.0 18.8 Greater London 73860 2.1 40.3 Eastern 18270 0.9 10.0 South West 3050 0.2 1.7 West Midlands 5370 0.3 2.9 East Midlands 4110 0.2 2.2 Yorks and Humber 2120 0.1 1.2 North East 4240 0.5 2.3 North West 18100 0.7 9.9 Scotland 12620 0.6 6.9 Wales 3180 0.3 1.7 N. Ireland 3860 0.6 2.1

UK 183170 0.8 100.0

of which: Greater South East 126530 1.4 69.1 Midlands 9480 0.2 5.2 Northern regions 24460 0.4 13.4 Scotland, Wales & NI 19660 0.5 10.7

Compared to the average figure of 0.8% of total employment, the Greater London and the South East are the regions where the aviation industry accounts directly for the largest proportion of jobs.

Turning to the second method of examining direct employment by region, Table 1b shows where the direct employees in the UK aviation industry actual live. This is constructed from information from airport studies on the regional distribution of addresses to which wages and salaries are paid, where available. Elsewhere we have used assumptions about which airports are likely to show comparable patterns of commuting.

Comparison of these results with those in Table 1a indicates that there are several significant examples of workers crossing regional boundaries to reach their workplace. A complete description of all the inter- regional commuting is shown in the matrix in Annex Table A1. Unsurprisingly, given the cluster of major airports in the south of the UK, the most significant movements are between the South Eastern, Eastern and Greater London regions. In the South East, while 89% of workers live in that region, around 8% travel from Greater London, 1% from the Eastern region and ½% live in the South West. The comparable figures for Greater London are heavily influenced by the proximity of Heathrow to the border with the South East region, with 47% of workers travelling across this boundary, only slightly below the 48% who reside in Greater London itself. A comparison between direct employment by workplace and residence shows the net impact of these flows between regions. While the largest share of total direct jobs (41%) are located in Greater London, only 22% of workers live in the region. Conversely, the South East provides only 19% of jobs, but is home to 36% of aviation workers.

9 Away from the south, there is far less movement between regions. For example, in the West Midlands, 92% of workers live in the same region, while around 3½% travel from the East Midlands. We assume these findings are mirrored in the East Midlands. Information provided for Scottish airports indicates that all workers live in the same region, and we assume that the same is true of Northern Ireland. In the North East region, airport studies for Newcastle show that 93% of employees reside within a 30 minute drive of the airport. As, the boundary defined by this journey lies well within the region, we assume all employment is confined to the region. The data for the North West shows a small proportion of employees (1½%) who live in the East Midlands, while 95% are based in the North West region itself.

Anecdotal evidence suggests that in some cases significant numbers of aircrew cross regional boundaries to work, travelling for example from Yorkshire and Humberside to man flights out of Manchester or from regions throughout the country to operate flights from London. The work patterns of these employees should be captured by the distribution of wages and salaries used to compile Table 1b, but limitations in the data may mean that this is actually more widespread than we have been able to pick up. (Annex Table A1 shows less than 1% of aviation workers in the North West making this journey from Yorkshire and Humberside, for example, and relatively limited numbers journeying from regions outside the greater South East area to London).

Table 1b. Direct Employment. 1998 (by residence) % of total % of UK regional direct aviation Direct employment employment South East 64870 1.8 35.4 Greater London 39380 1.2 21.5 Eastern 19650 0.9 10.7 South West 3860 0.2 2.1 West Midlands 5850 0.3 3.2 East Midlands 4310 0.3 2.4 Yorks and Humber 2900 0.1 1.6 North East 4660 0.5 2.5 North West 17350 0.7 9.5 Scotland 12950 0.6 7.1 Wales 3330 0.3 1.8 N. Ireland 4070 0.7 2.2

UK 183170 0.8 100.0

of which: Greater South East 123900 1.4 67.6 Midlands 10160 0.3 5.5 Northern regions 24910 0.5 13.6 Scotland, Wales & NI 20350 0.6 11.1

These figures for the workplace and residence of aviation employees do not fully reflect the contribution the aviation industry makes to each region. There are a number of important examples where jobs based at a particular location are sustained by economic activity taking place elsewhere. We have also calculated adjusted regional figures that take account of the most important of these3. It is important to identify the region that is responsible for providing these jobs so that the implications of different scenarios can be

10 modelled correctly, because policy changes implemented in one region will have an impact elsewhere and cannot be considered in isolation. The examples covered here are outlined below.

The first example is that of aircraft maintenance. There are several specialist centres that service planes that are based at airports in other regions (or indeed overseas). Some smaller airports have significant maintenance operations above and beyond those needed for aircraft operating flights from them, for example Cardiff, Southend and Cambridge. Other somewhat larger airports may also have maintenance facilities that are widely used to service aircraft based elsewhere as well as those flying from the airport, for example Luton, Stansted and Manchester. This can include aircraft operating primarily from overseas airports, thereby contributing to the UK’s exports of services. There is also a large engine overhaul facility owned by General Electric, which is located just outside Cardiff, but used extensively by British Airways. The first three examples mentioned (Cardiff, Southend and Cambridge) were not allowed for at the time of the Part 1 study in the estimates of the overall level of employment in aviation in the UK. Consequently, the national total presented in this study is slightly higher than reported in that piece of work. For those airports covered by the Part 1 study, the regional employment numbers already count these maintenance workers. Information from airport studies and individual airports gives the number of jobs involved, while advice from these companies is used to allocate the employment in these facilities to the region(s) generating the job.

Employees at airline headquarters may also depend to some extent on economic activity that occurs outside the region where they are located. Again, the workplace of these employees is recorded in Table 1a, since they are typically covered by airport studies, but this does not necessarily indicate the region that generates the economic activity that provides them with their jobs. This link is established by using information provided by individual airlines on the number of people employed at headquarters and the relative importance of each regional airport to their activities.

Direct employment at air traffic control centres and call centres depends on the aviation industry nationally, but it is important to identify the region in which the employment occurs, because this has a direct impact on regional prosperity and the regional distribution of the induced jobs that result from spending by these employees. The 4874 such jobs which were estimated to exist nationally have all been allocated to the regions. Of these jobs, 2503 are in air traffic control centres exercising responsibility over the national airspace, as opposed to those at airports, who are already counted in airport studies. Definitive figures on employment at individual centres are not available, but since they are based at West Drayton, Manchester and two at Prestwick, the workers have been allocated to Greater London, the North West and Scotland in line with the number of aircraft movements handled by each centre. Turning to call centres, 1375 of these jobs are in call centres whose location is known, while the remaining jobs have been allocated across all regions according to the regional distribution of total employment.

Freight forwarding activity represents an additional complication. Much of the freight forwarding industry is based around Heathrow, but some of the freight it processes is actually passing through airports in other UK regions. More importantly, much of the freight that flies to or from Heathrow will originate or end up in other regions, but be carried by other means (especially trucks) to/from Heathrow before/after being flown to/from other parts of the world.

Heathrow carries more airfreight than any other airport, and is the UK’s leading port by value of cargo handled, with the vast majority of its freight carried in the hold of passenger aircraft as a result of the range and frequency of services. East Midlands and Stansted are significant airports for pure freight transport, with East Midlands airport serving as the most important regional hub for express/integrator freight. More details on freight activity are contained in the air freight study available on the DTLR website (www.aviation.dtlr.gov.uk/atwp/freight/index.htm).

11 (ii) Aviation output

The total value-added (ie the value of its output less the cost of inputs bought in from other industries) by the UK aviation industry in 1998 was estimated to be £10.2 billion in 1998 prices, equivalent to 1.4% of GDP. This figure represents the total of value-added by airlines, air transport supporting services and those in other areas (for example distribution, hotels and catering at airports). Official data are not available at a regional level for air transport services, but are available for the much more aggregate category of transport and communications services. We have constructed regional data for value-added in aviation by allocating the total national value-added between the regions on the basis of the numbers of direct jobs4 - Table 2 shows the estimated value-added by aviation in each region. This is inevitably an approximation. It is quite likely, for example, that the value-added per employee will be different for domestic and international flights, or short-haul and long-haul flights. But the figures should nevertheless give a useful guide to the relative contribution of aviation to GDP in the different regions.

Table 2. Direct Employment and Value-added, 1998

Direct Value added % of Employment £bn(1998 prices) regional GDP South East 34400 1.9 1.8 Greater London 73860 4.1 3.2 Eastern 18270 1.0 1.6 South West 3050 0.2 0.3 West Midlands 5370 0.3 0.5 East Midlands 4110 0.2 0.5 Yorks and Humber 2120 0.1 0.2 North East 4240 0.2 0.9 North West 18100 1.0 1.4 Scotland 12620 0.7 1.2 Wales 3180 0.2 0.6 N. Ireland 3860 0.2 1.3

UK 183170 10.2 1.4

of which: Greater South East 126530 7.0 2.4 Midlands 9480 0.5 0.5 Northern regions 24460 1.4 0.9 Scotland, Wales & NI 19660 1.1 1.1

The results reflect the location of the UK’s major airports, and consequently the distribution of direct employment across the different regions. Unsurprisingly, given the concentration of major airports in these regions, the South East and Greater London together account for nearly two-thirds of value added by aviation. The next largest contributions come from the Eastern and North West regions.

(iii) Employment dependent on aviation

Indirect employment In addition to direct employment in aviation, there are significant numbers of jobs supported by the purchases made by the aviation industry, referred to as indirect employment. These jobs, which are up the supply-chain from the aviation industry, include employment in the energy sector associated with purchases

12 of fuel, the aerospace sector, providers of IT equipment, construction workers and the producers of goods sold in the shops in terminal buildings.

The ratio of indirect to direct jobs (the ‘indirect employment multiplier’) will depend on several factors, including the nature of the business of the direct employer, its sourcing policy, and the degree of vertical integration. As with direct employment, our calculation of indirect employment effects starts off at the level of the individual airport. These figures are then aggregated to give the regional picture.

Existing airport studies estimate the indirect multipliers for Heathrow and Manchester to be 0.75 and 1.83 respectively, and we use these results in calculating the detailed picture for 1998. Much of the difference between these two figures reflects the construction work that was taking place at Manchester in 1998 - during the year, the airport company undertook substantial capital expenditure on the construction of a second runway and invested in the upgrade of terminal facilities. Although the indirect multiplier of 1.83 gives an appropriate picture of the employment numbers in 1998, York Consulting have estimated that the equivalent multiplier for a more typical year would be 1.38. Stripping these cyclical effects from the North West indirect employment number of 23650 presented below, would reduce the figure to 19250 (0.7% of the workforce), with the national total falling to 190160, but to gain an accurate picture of the industry in 1998, the calculation of both indirect and induced employment is based around the higher figure. Further differences in indirect multipliers arise from the differing composition of the workforce at the two airports. For example, at Heathrow airlines and handling agents account for almost 70% of on-site employment. This is also the largest group at Manchester, but accounts for only 41% of employment. Implicitly, each separate group of workers has its own indirect employment multiplier, so a different composition of workforce across airports, leads to a different aggregate indirect employment multiplier.

In the Part 1 study, the overall multiplier of 1.31 was used for the remaining airports. This figure was reached by looking at the number of people involved in different aspects of the aviation industry in all the other airports. Having identified the reasons for most of the discrepancy between the Heathrow and Manchester multiplier, our figure was arrived at by looking at the following factors and applying the method outlined below:

· First, we identified what proportion on average of their employees work for airlines/handling agents (ie the closest equivalent we could get from the employment studies to SIC 62 in the National Accounts) as opposed to in concessions or in other activities.

· We were then able to calculate the indirect employment associated with the employees in airlines using the official UK input-output tables, which identify the supply chain for air transport separately5.

· Similarly, for employees in concessions, we estimated the indirect employment multiplier from the UK input-output tables on the assumption that retailing at airports supports the same number of indirect jobs per direct employee as retailing nationally.

· Finally, for the indirect employment generated by airport jobs outside airlines and concessions (which represent around 30% of total direct employment), we used for simplicity multipliers calculated for these activities by the Manchester employment survey since analysis of the estimates in conjunction with York Consulting and DTZ PIEDA Consulting (for Heathrow) supported the view that these were likely to be representative of the majority of other airports. Where survey evidence becomes available for other airports this should be used in providing detailed assessments

Using this average multiplier across all airports for which individual surveys do not provide specific information is arguably more appropriate for a national study than a regional one - different airports are likely in practice to have different multipliers, if for no other reason than that the mix of employees across different types of activity will differ. And they are likely to vary over time for an individual airport. There

13 is therefore a considerable degree of uncertainty over the multiplier for an individual airport at any moment in time. In practice, we have relatively little data on how the employment mix varies other than for the biggest airports. But information from Newcastle does allow some conclusions to be drawn about the sensitivity of the overall indirect multiplier. The data provided splits direct employment into the categories of airlines, concessions and others. By applying the appropriate indirect multipliers from the Part 1 study, an aggregate indirect multiplier of 1.68 is obtained for 1998 and 1.48 for 1999. As well as this marked difference over the course of one year, this estimate is extremely sensitive to how workers are allocated between the airlines and others category. Because of the degree of uncertainty surrounding the estimate and to avoid presenting a range of different estimates based on different possible multipliers, we have picked an illustrative multiplier of 1.35, and this is used for all airports other than Heathrow for assessing the impact of possible scenarios for the development of aviation in the future. But for the snapshot of the industry in 1998, the multipliers used in the Part 1 study are applied.

It is worth bearing in mind that the indirect multiplier used for future projections is in effect a long-term multiplier. In scenarios that envisage significant amounts of development at certain airports, there is likely to be a larger interim boost within an individual region to indirect employment from construction work needed, but this would be unlikely to be sustained once the necessary facilities had been built.

Table 2 shows the regional breakdown of indirect employment. As the multipliers taken from the national study only give the overall indirect employment figures, but are silent on the regional distribution, information collected for individual airport studies on the amounts spent on goods and services is used to determine where indirect employment is created.

Where information on the breakdown of purchases by region is incomplete - for example, a number of regions are aggregated into a significant ‘other areas’ category - we use the concept of employment in ‘tradeable sectors’6 in each of the omitted regions to allocate the remaining employment proportionally. This refers to the amount of employment producing goods and services that are liable to be traded across regional boundaries. This is not a concept that can be measured directly, but we follow Rowthorn (1999)7 in defining it as employment in agriculture, extraction, manufacturing, together with additional employment in financial and business services over and above a minimum proportion of the population set by the lowest region. It is possible that this assumption makes the regional concentration of indirect jobs appear less than it actually is, since the concept of tradeable employment necessarily averages across sectors with different regional concentrations, but we have minimised the impact of this by only using it where there is insufficient information from airport studies to provide a complete allocation of purchases by region.

14 Table 3 shows the region of residence of indirect employees.

Table 3. Indirect Employment. 1998 % of total Indirect employment South East 55000 1.6 Greater London 36690 1.0 Eastern 19970 0.9 South West 9330 0.5 West Midlands 10710 0.5 East Midlands 8940 0.5 Yorks and Humber 10660 0.5 North East 5680 0.6 North West 24430 1.0 Scotland 9670 0.5 Wales 3370 0.3 N. Ireland 3100 0.5

National Total 197550 0.8

of which: Greater South East 111660 1.2 Midlands 19650 0.5 Northern regions 40770 0.7 Scotland, Wales & NI 16140 0.4

The full breakdown of the relationship between the region of direct employment and that of indirect employment economic is shown in Annex Table A2. A number of assumptions have been made for those airports where the distribution of spending up the supply chain is not available. The results from individual airports where data are available show that these dependent jobs are spread far more widely than is the case for direct employment, with a far smaller share falling in the own region. For example, for Wales, the West Midlands, the South West8, and Yorkshire and Humber9, the proportion of indirect jobs remaining within the region is 37%, 40%, 44% and 35% respectively. The North West10 is the region which has the largest proportion of jobs remaining in the region; some 60%, while 16% are located in Yorkshire and Humber. Many of the indirect jobs created are situated in the South East. Although this region accounts for 19% of all direct employment in the aviation industry, it is home to around 27% of all the indirect jobs that are created. This result in part reflects the share of the region in the tradeable sectors of the economy, (around 14%), but also the fact that 44% of the spending up the supply chain by airports in the Greater London region, (which accounts for most direct employees), occurs in the South East while 32% remains in same region. This also ensures that while 41% of direct jobs occur in Greater London, only 17% of indirect jobs are located in the region. Equally, the concentration in the South East reflects the extent to which the aviation supply industry is presently located in proximity to Heathrow and the other London airports.

Induced employment Direct and indirect employees in the aviation sector create induced employment through their spending on goods and services. The Part 1 study estimated that nationally, the amount of induced employment resulting from this spending was 25% of all the direct and indirect jobs in the industry, this figure being based on results from Oxford Economic Forecasting’s Macroeconomic Model of the UK economy. The regional

15 distribution of this impact will depend primarily on where employees live. This is not necessarily the same as where they work. For direct employees, we can estimate the relationship between the region where the job occurs and the region where the worker lives by using the regional distribution of wages and salaries paid by each airport. The matrix in Annex Table A1 describes in full the region of residence as well as the region of the workplace for direct employees. For indirect employees, where we have estimated the regional distribution of indirect jobs supported by the direct jobs in each region, we assume the employee lives in the same region they work in.

Establishing the region of residence of direct and indirect workers is essential for the calculation of induced employment, because the majority of spending takes place in the region where workers live. But not all the induced jobs will be there, since spending on hotels, for example, may take place elsewhere and spending on goods in the shops will support jobs in the regions supplying the goods in addition to those in retailing in the region of spending. We assume that half of the induced employment remains within the region where the direct and indirect employees live11. The remaining 50% is split between all the regions, in proportion to their share of employment in the tradeable sectors of the economy. Annex Table A3 shows the full calculation of the relationship between the region of direct and indirect jobs on the one hand, and induced jobs on the other hand based on the assumptions above, and Table 4 below shows the total number of induced jobs in each region.

Table 4. Induced Employment. 1998 % of total Induced employment South East 21700 0.6 Greater London 17350 0.5 Eastern 9260 0.4 South West 5630 0.3 West Midlands 6830 0.3 East Midlands 5290 0.3 Yorks and Humber 5530 0.3 North East 2750 0.3 North West 10010 0.4 Scotland 6330 0.3 Wales 2630 0.3 N. Ireland 1880 0.3

National Total 95190 0.4

of which: Greater South East 48310 0.5 Midlands 12120 0.3 Northern regions 18290 0.3 Scotland, Wales & NI 10840 0.3

Adding together direct, indirect and induced employment (Table 5) shows that in the regions where aviation has the biggest impact, it supports up to 3½% of jobs through these routes.

16 Table 5. Total Aviation-related Employment. 1998 % of total Direct Indirect Induced Total employment South East 34400 55000 21700 111100 3.3 Greater London 73860 36690 17350 127900 3.6 Eastern 18270 19970 9260 47500 2.2 South West 3050 9330 5630 18010 0.9 West Midlands 5370 10710 6830 22910 1.1 East Midlands 4110 8940 5290 18340 1.1 Yorks and Humber 2120 10660 5530 18310 0.9 North East 4240 5680 2750 12670 1.4 North West 18100 24430 10010 52540 2.0 Scotland 12620 9670 6330 28620 1.4 Wales 3180 3370 2630 9180 0.9 N. Ireland 3860 3100 1880 8840 1.4

National Total 183170 197550 95190 475920 2.0

of which: Greater South East 126530 111660 48310 286500 2.9 Midlands 9480 19650 12120 41250 1.1 Northern regions 24460 40770 18290 83520 1.5 Scotland, Wales & NI 19660 16140 10840 46640 1.3

One other aspect of aviation-related employment discussed in the national study was jobs in tourism-related industries. Travel and tourism are inextricably linked. Tourism depends on the travel industry to bring visitors, but equally the travel industry depends on tourism to generate demand for its output. 66% of overseas visitors to the UK arrive by air, and passengers arriving by air account for 81% of total spending by overseas visitors to the UK12. The prevalence of tourism-related jobs in each region gives an indication of the potential importance of aviation to the region in this respect - see Table 6 - with Scotland and Greater London showing the largest concentration of tourism-related jobs.

17 Table 6. Employment in Tourism

% of total Employees employment South East 224 5.9 Greater London 272 6.7 Eastern 135 5.6 South West 151 6.5 West Midlands 127 5.2 East Midlands 105 5.5 Yorks and Humber 133 5.9 North East 66 6.5 North West 191 6.5 Scotland 161 7.1 Wales 72 6.2

GB Total 1636 6.1 of which: Greater South East 631 6.1 Midlands 231 5.3 Northern regions 391 6.3 Scotland & Wales 233 6.8 Source: see Annex Table A4 for details

18 II. The Importance of the Aviation Industry to Economic Growth in the Regions

Part 1 of the study identified several ways in which aviation contributes to economic growth:

· It makes a direct contribution as a source of output and productivity growth in its own right.

· Those sectors which are likely to be the main sources of economic growth over the next 10-15 years are typically among the most dependent on aviation. Restricting their access to air travel is therefore likely to be a serious constraint on their ability to grow.

· Good air transport links are important to encouraging inward investment into the UK and to encouraging firms already located here to base new projects in this country.

· More fundamentally, the aviation industry is part of the transport infrastructure on which many other parts of the economy depend, and one strand of economic theory highlights that improvements in transport infrastructure can boost productivity growth across the rest of the economy.

All of these effects are felt at the regional level as well as the national level.

A. The direct contribution of aviation to growth in the regions

Key points · Assumptions about productivity trends are very important to projections of the contribution aviation is expected to make to jobs in each region. Our central assumptions mean that direct employment in aviation is projected to grow from 183,000 in 1998 to 242,000 by 2030 (Table 7). The largest absolute increase in jobs is projected in the Eastern region, where 20,000 new jobs in aviation are projected, as a result of high demand growth predicted at Stansted.

· Including indirect and induced jobs, total aviation-related employment is projected to rise by 240,000 between 1998 and 2030, to 2.4% of all jobs (Table 9). By 2030, aviation-related employment is projected to be as high a share of total employment in Eastern region as it is in Greater London, in contrast to today when the share is around 50% higher. A similar increase is projected in the North West, though from a somewhat lower share, while all other regions outside London and the South East are also expected to see some increase in the share of employment accounted for by aviation-related employment.

· The contribution of aviation to GDP is projected to rise from 1.4% in 1998 to around 2% by 2015, before stabilising around that level as the industry matures and passenger growth is assumed to slow. Once again the biggest increase is expected in the Eastern region, where the contribution is projected to rise from 1.6% of GDP in 1998 to 3.1% in 2030 (Table 10). All other regions, with the exception of Northern Ireland, are also projected to see some increase in the share of GDP contributed by aviation.

19 Introduction As we highlighted in the report on the contribution of aviation to the national economy, the demand for air transport has risen strongly over the last 25 years, driven by falling real prices and rising incomes. For example, the number of passengers travelling via UK airports has increased by 280% since 1975, while the volume of freight handled by UK airports has risen by over 210%. This compares with an increase in UK gross domestic product (GDP) of around 60% over the same period. The result is that aviation directly contributed around 2½% of the real growth of the economy over the last 25 years or so- four times as much as if it had remained at around 0.6% of GDP as it was in 1975.

And the demand for air travel is expected to continue to expand rapidly. For example, on the projections we used for the Part 1 study total passenger numbers are expected to reach 310 million by 2015. This is almost twice the number in 1998, and would mean air travel growing on average by 4% a year over the next 15 or so years, close to double the Government’s estimate of the overall economy’s potential rate of growth. On this basis, the aviation industry is set to make a rapidly expanding contribution to the UK economy, with value-added in aviation expected to reach £18 billion by 2015 (in 1995 prices) – nearly twice its level in 1998 and equivalent to 2% of GDP.

The Part 1 study showed that:

· Direct employment in aviation is projected to increase by 30,000 by 2015, to 210,000. On this basis, the aviation industry is set to employ, for example, a third more people than motor manufacturing and become a bigger employer than the chemicals industry.

· Aviation is expected to generate another 290,000 jobs indirectly through the supply chain by 2015 - 90,000 higher than now.

Assumptions For the purposes of this report we have used a set of projections to 2030 that assume growth in aviation is relatively unconstrained by restrictions on airport development. The projections show passenger numbers growing by an average of 2.5% a year between 2015 and 2030, falling to 1½% a year by the end of the period. The regional importance of this growth depends on the assumed distribution of passengers across regions (which is shown in Annex Tables A5-A6), and also the likely pattern of supporting activities across the regions. Our projections implicitly assume that supply chains will remain stable. In practice, they almost certainly will not. But it is very difficult to predict the implications this might have for the distribution of indirect jobs around the country. For example, as aviation grows in regions outside the broadly-defined South East, activity may reach levels where additional support activities are attracted to locate close to regional airports. Similarly, new call centres, airline headquarters, air traffic control centres, maintenance facilities or training schools may be developed outside the South East. This will almost certainly occur over time, but it is difficult to predict the precise timing or location of such activity. For this reason we have assumed a stable distribution of supply chain activity, but this may be overly conservative and understate the potential longer term contribution of aviation in individual regions outside the South East.

The approach to productivity growth is the same as in Part 1, namely to assume that the number of jobs per thousand passengers falls each year as airports and airlines make continuous efforts to improve efficiency. The Part 1 study, which looked at projections to 2015, assumed that productivity growth continued in line with its historical trend of 3% a year in the aviation industry. However, the further ahead projections are made for the more aviation is likely to take on some of the characteristics of a more mature industry, and the less likely productivity and output are to continue growing more rapidly than the average for the economy as a whole. The modelling work for the Part 2 study extends to 2030, by which time the growth in passengers per year is projected to have slowed to less than 2% a year compared with around 4% a year

20 assumed in Part 1. We have therefore based our core analysis on the assumption that the rate of productivity growth in aviation slows to 2% a year by 2020, in line with the whole economy average.

Another complication when looking at how the figures break down regionally is that productivity growth may well vary across different airports according to the stage of development reached and the character of traffic and airline operations being accommodated – in some cases as an airport reaches a certain critical mass functions that were previously carried out elsewhere are now viable locally, with the result that there can be a step change in the level of employment. This may, for example, imply that our figures understate the employment and overstate the productivity that would be achieved if Manchester Airport or Edinburgh Airport developed into another hub or as major regional airports, such as Newcastle or Leeds/Bradford, develop to the point where they can sustain greater levels of maintenance or training activity for example. In practice each airport is likely to display a different pattern of productivity change over coming years related to the amount of new development/new facilities required to achieve forecast growth. Airports requiring major investment in terms of terminal, retail, hotels, freight or maintenance will see productivity gains significantly offset by these developments. However, it is not just the size of an airport that affects this - existing data for jobs per million passengers at different UK airports show no relationship with airport size. An assessment of the impact of airports by ACI in 199813 summarised the characteristics of airports with different ratios of jobs per million passengers as:

Low jobs density (350-750 jobs per mppa/unit14): low/medium passengers/freight; domestic traffic; charter traffic; high utilisation; no airlines based; limited development.

Medium jobs density (750-1100 jobs per mppa/unit): medium/high passengers/freight; international traffic; scheduled traffic; some airlines based; significant development.

High jobs density (1100-1500 jobs per mppa/unit): international hubs; high passengers/freight; international traffic; scheduled traffic; major airlines bases; substantial development.

Very high jobs density (1500+ jobs per mppa/unit): low/medium passengers and freight; low utilisation; airline headquarters; airline maintenance bases.

The varied factors affecting jobs per million passengers make it difficult to predict how this relationship might evolve over time, particularly in an analysis at the regional level rather than for individual airports. What is a valid assumption for the industry as a whole is not necessarily a good central assumption for any individual airport or region and may not be typical across a range of different airports. It follows that detailed local analysis may produce results substantially at variance with those shown here and may be more appropriate to the circumstances of an individual airport. This is a complex subject, ideally requiring detailed case by case research. The likelihood that some regional airports will achieve productivity growth higher than the average and some lower needs to be borne in mind when looking at the figures presented here which follow the general approach of assuming that productivity in aviation grows at the same rate across different regions. We have also included a comparison of how many people the industry might employ in different regions if, for these or other reasons, productivity growth turned out rather slower.

Forecasting employment numbers from projections of passenger numbers and assumptions about productivity growth also means that the analysis does not make any allowance for changes in the proportions of long haul and short haul flights at different airports, to the extent that there are different employment requirements per passenger for different flight types. This could also affect the level of employment in certain regions as the characteristics of certain airports change over time. An additional limitation of our approach based on passenger projections and productivity assumptions affects some airports where freight transport may be more important than passenger travel. In those cases different

21 growth rates for freight and passenger traffic would mean employment growth would be likely to differ from the projections presented here.

The final key assumption we have made is to adjust the figures presented here for 1998 to those that might be expected in a more ‘normal’ year. As discussed in Chapter I, some of the differences between the indirect employment multipliers in 1998 were due to factors specific to that year, for example the large amount of construction work undertaken at Manchester Airport in connection with the second runway and upgrading terminal facilities. This means that a relatively large number of indirect jobs were supported by Manchester Airport that year, which is reflected in the picture of 1998 presented in Chapter I. But in analysing the contribution aviation is expected to make to regional economies over the future, it would be misleading to use multipliers that were only appropriate to a specific year. So our general assessment is based on assumptions about the indirect and induced employment that would normally be expected to be associated with our projected levels of direct employment. To enable comparisons to be made between the contribution of aviation now and in the future, figures for 1998 in this chapter are also based on this assumption – so differences over time depend on the growth of aviation compared with the rest of the economy rather than on one-off factors. This has the effect of smoothing the impact in any region over time.

Employment The assumptions we have made mean that direct employment in aviation is projected to grow from 183,000 in 1998 to 242,000 by 2030 (Table 7 – more detailed employment tables are in Annex A, Tables A6-A11). This would imply on our forecasts an increase from 20% of employment in transport services as a whole to 24% of the transport services industry. The largest absolute increase in jobs based on our assumptions is projected in the Eastern region, where 20,000 new jobs in aviation are projected. But increases are expected in all other regions except Greater London (where passenger growth is assumed to be slowest, and a small decline in employment is projected), and Northern Ireland where projected job numbers are almost static.

Table 7: Direct Employment in Aviation Assuming productivity growth of 3% pa falling to 2% pa '000s % of total 1998 2030 1998 2030

S.East 34.4 43.3 1.0 0.9 G.London 73.9 68.0 2.1 1.9 Eastern 18.3 38.6 0.9 1.8 S.West 3.0 7.2 0.2 0.4 W.Mid. 5.4 11.9 0.3 0.6 E.Mid 4.1 9.5 0.2 0.6 Yks&Hu. 2.1 4.6 0.1 0.2 Nw&My 18.1 30.5 0.7 1.2 N.East 4.2 5.7 0.5 0.7 Wales 3.2 4.2 0.3 0.4 Scot. 12.6 14.4 0.6 0.7 N.I. 3.9 4.0 0.6 0.7

UK 183.2 242.1 0.8 1.0

Given the difficulties of predicting how productivity growth in each region is likely to differ from the national average, we illustrate in Table 8 what the implications for direct aviation jobs in each region would

22 be if productivity growth were only 1% a year between 1998 and 2030 or if productivity were static, rather than the 2-3% a year assumed in our central projections. This could have significant implications for the number of jobs in individual regions, although we regard it as unlikely that more than a few regions would show this degree of jobs growth.

Table 8: Direct Employment in 2030, '000s - the impact of alternative productivity assumptions

Central 1% a year 0% a year case growth growth S.East 43.3 70.1 70.1 * G.London 68.0 110.2 110.2 * Eastern 38.6 62.5 62.5 * S.West 7.2 11.6 16.0 W.Mid. 11.9 19.3 26.6 E.Mid 9.5 15.4 21.2 Yks&Hu. 4.6 7.4 10.2 Nw&My 30.5 49.4 67.9 N.East 5.7 9.3 12.8 Wales 4.2 6.9 9.4 Scot. 14.4 23.3 32.1 N.I. 4.0 6.5 8.9

UK 242.1 392.0 447.9

* These figures for south-eastern regions assume 1% productivity growth is still achieved, given the generally tight labour market conditions SE airports operate in.

The future relationship between direct aviation employment in the one hand and indirect and induced employment on the other hand will depend on how supply chains in the industry develop over time. If changes in the absolute size of regional aviation industries affect the degree to which supply chains are serviced locally or further afield, this will affect the distribution of indirect employment across the country for any given distribution of direct employment. Because of the difficulty of predicting these shifting patterns, however, we have built our overall aviation-related employment projections on the assumption that supply chains in the future will show similar patterns to today. Adding our central productivity assumptions, total aviation-related employment is projected to grow by 240,000 by 2030, to 2.4% of all jobs. By 2030, aviation-related employment is projected to be as high a share of total employment in Eastern region as it is in Greater London, in contrast to today when the share is around 50% higher. The 54,000 extra jobs in aviation-related jobs in Eastern over this period represent 6% of the overall increase in employment we expect to see in the region.

Table 9: Total Aviation-Related Employment '000s % of total 1998 2030 1998 2030

S.East 111.6 148.8 3.3 3.2 G.London 127.9 147.9 3.6 3.5 Eastern 47.8 101.4 2.3 3.5 S.West 18.0 33.4 0.9 1.2 W.Mid. 22.7 44.0 1.1 1.8 E.Mid 18.3 35.5 1.1 1.7 Yks&Hu. 17.0 32.2 0.9 1.4 Nw&My 47.2 84.9 1.8 3.2 N.East 12.6 20.0 1.4 1.9 Wales 10.0 15.5 1.0 1.3 Scot. 28.8 39.8 1.4 1.7 N.I. 8.9 11.4 1.5 1.5

UK 470.7 714.9 2.0 2.4

Output The contribution of aviation to GDP is projected to rise from 1.4% in 1998 to around 2% by 2015, before stabilising around that level as the industry matures and passenger growth is assumed to slow. Once again the biggest increase is expected in the Eastern region, where the contribution is projected to rise from 1.6% of GDP in 1998 to 3.1% in 2030.

Table 10: Value-added in Aviation £billion, 1995 prices % of GDP 1998 2030 1998 2030

S.East 1.8 5.2 1.8 2.0 G.London 3.8 8.1 3.3 3.4 Eastern 0.9 4.6 1.6 3.1 S.West 0.2 0.9 0.3 0.6 W.Mid. 0.3 1.4 0.5 1.4 E.Mid 0.2 1.1 0.5 1.1 Yks&Hu. 0.1 0.5 0.2 0.5 Nw&My 0.9 3.6 1.4 2.7 N.East 0.2 0.7 1.0 1.6 Wales 0.2 0.5 0.7 1.1 Scot. 0.6 1.7 1.2 1.6 N.I. 0.2 0.5 1.4 1.3

UK 9.4 28.9 1.4 2.0

B. The wider contribution of aviation to growth in the regions

Key points · Sectors seen as the main sources of economic growth, for example in regional economic strategies, are typically among the most dependent on aviation.

· Good air transport links are one of the important factors in encouraging inward investment into particular parts of the UK. Within the manufacturing sector, foreign-owned firms are most important to existing investment in Scotland, the West Midlands, the North East and Wales (Table 11). Developing and improving good air transport links could be equally important for regions that have been less successful in the past at attracting inward investment, whether to help attract additional inward investment or to improve the prospects for indigenous investment.

Part 1 of the study looked at a number of indicators of the importance of aviation to different sectors. Although there are different ways in which aviation matters in different sectors, probably the most helpful indicators were spending on air transport per employee for service sectors, and the percentage of exports carried by air for manufacturing sectors. On these indicators, extraction, transport & communications, and financial services were the sectors most dependent on air transport outside manufacturing, and parts of the electrical and optical equipment sector within manufacturing. These sectors are highlighted in Annex Table A14, which indicates the importance of different sectors to each region of the UK in 1998. For each sector the table also highlights up to three regions were it is most heavily concentrated.

It is important to note that the table does not indicate all areas of the economy that depend on aviation or all areas of regional specialisation, since a lot gets hidden in the aggregation. The pharmaceuticals sector, for example, makes a significant use of air transport both because its products have a high value to weight ratio, and because research and development as an activity is often accompanied by high business passenger travel. But it does not show up in the table because pharmaceuticals is classified within the broader chemicals industry which has a much lower value to weight ratio on average and therefore makes much less use of air for exporting its products.

It is also worth bearing in mind that an absence of broad sectors dependent on aviation within a region does not mean that aviation is unimportant to that region. It may matter a lot to sub-sectors or to sectors that are likely to grow in importance. Neither does it mean that the existing aviation infrastructure in the region has been inadequate to allow such sectors to develop - there may be other unrelated reasons why the region has been relatively uncompetitive in that sector. But it does suggest that if the region is to develop such sectors into significant sources of growth then there will be a need to develop the range of accessible air services meeting regional needs from conveniently located airports in or adjacent to a region.

As the Part 1 Report emphasised, a wide range of factors play a part in determining the scale and distribution of foreign direct investment. These include unit labour costs in the recipient country compared with other potential locations; the degree of market access; language; political stability; tax and other incentives; and trade policy. But the trend towards globalisation is making good international communications and transport links an increasingly important component of firms’ investment decisions, including both the speed of access to air services and the frequency and range of destinations served.

A number of the examples quoted in the Part 1 Report15 suggest that air transport links affect location decisions between different regions within the UK as well as between UK and non-UK locations. Indeed, they may be more important in this context since a number of the other factors which affect the decision will vary less between regions. Recent work at Newcastle airport has emphasised the role aviation can play in ensuring a region is considered suitable by key investors. Nissan, for example, listed grant support, the availability of a site, labour supply, and infrastructure, including air, sea and road links, all as influential factors. And their Managing Director said ‘Newcastle Airport is not only vital to the success of our region, it also plays a very important role in our business. Equally, Proctor and Gamble have cited good air links as having played an increasingly important role in reinforcing their north east presence, with their Managing Director saying ‘with our major presence on Tyneside, a first class communications and transport network is essential to our business success”16. Similar stories could be cited from other regions adjacent to major international airports.

There is no simple indication of the overall importance of FDI to different regions. Within the manufacturing sector, foreign-owned firms are most important to existing investment in Scotland, the West Midlands, the North East and Wales. But developing and improving good air transport links could be equally important for regions that have been less successful in the past at attracting inward investment, whether to help attract additional inward investment or to improve the prospects for indigenous investment.

Table 11: Importance of foreign-owned firms - share of regional total, 1994-97

Manufacturing Manufacturing investment output S.East 37.6 27.6 G.London 30.2 28.1 Eastern 35.3 27.7 S.West 25.8 19.5 W.Mid. 40.3 26.0 E.Mid 23.3 19.3 Yks&Hu. 18.4 15.8 Nw&My 24.5 23.1 N.East 39.6 29.3 Wales 39.5 32.5 Scot. 41.3 31.5 N.I. 23.2 30.3

UK 32.0 25.2

More fundamentally, the Part 1 national study revealed the role aviation can play in supporting economic development through facilitating productivity growth in the rest of the economy, through such factors as enlarging potential markets and therefore encouraging innovation, competition, and economies of scale. We expect such effects to be strongest in those regions with the best links, both to other parts of the UK and to other parts of the world.

26 C. The role of Aviation in Each Region

This section provides a summary region-by-region of some of the key facts and figures relating to the contribution of aviation to the region.

Greater London

Passengers: 61.8 million terminal passengers in 1998 (39% of UK total).

Direct employment: 73,860 jobs located in region in 1998 (41% of UK direct employment in aviation, 2.1% of jobs in region). 39,380 jobs for residents of region (1.2% of jobs in region. 46% of jobs taken by residents of South East)

Total employment: direct, indirect and induced jobs from aviation account for 127,900 jobs in 1998 (3.6% of jobs in region).

Value-added: £4.1 billion in 1998 (3.3% of regional GDP).

Aviation-related activity in the region: The two major airports are Heathrow and London City. Heathrow accommodates the headquarters of British Airways although it maintains its 747 fleet at Cardiff airport.

Clusters and growth sectors: Financial services, transport & communications, business services.

Importance of Aviation for Growth · ECS Part I showed financial services and transport & communications make relatively heavy use of air transport services.

· London’s success as an international city depends on its accessibility from around the world (and vice versa!).

· London’s aviation is vital for the south east and rest of the UK, as well as London itself.

· Direct employment in aviation is projected to fall by 6,000 by 2030, but total aviation-related employment is expected to rise by 20,000.

· Value-added in aviation is projected to increase by £4.3 billion (in 1995 prices) by 2030, contributing 3.4% of regional GDP, almost the same share as in 1998.

South East

Passengers: 29.8 million terminal passengers in 1998 (18.8% of UK total) but many passengers travel onto London to generate economic activity there. 30% of UK and 59% of foreign business passengers here stated Greater London as their journey’s origin or destination, 30% and 43% respectively for the leisure market.

27 Direct employment: 34,400 jobs located in region in 1998 (19% of UK direct employment in aviation, 1.0% of jobs in region). 64,870 jobs for residents of region (1.8% of jobs in region. 46% of jobs in Greater London taken by residents of South East)

Total employment: direct, indirect and induced jobs from aviation account for 111,100 jobs in 1998 (3.3% of jobs in region).

Value-added: £1.9 billion in 1998 (1.8% of regional GDP).

Aviation-related activity in the region: The two major airports are Gatwick and Southampton.

Clusters and growth sectors: The region has concentrations of activity in electrical & optical equipment manufacturing, and in business services. The RDA sees high tech activities being particularly important to growth, in areas such as e-commerce, ICT, multi-media, high-tech engineering and biotechnology.

Importance of Aviation for Growth · Concentration of knowledge-based, high value-added industries means aviation important for sectors with high value-added/weight ratio and high demand for business travel in research-based activities.

· For example, “A major success factor in the success of a cluster is whether or not leading researchers and managers are attracted to live in the area. We found that the ‘intellectual buzz’ of the research environment, proximity to London, rural setting, and access to international airports were all important factors.” Lord Sainsbury’s report on biotechnology clusters (April 1999), paragraph 3.6

· Direct employment in aviation is projected to rise by 9,000 by 2030, and total aviation-related employment is expected to rise by 37,000.

· Value-added in aviation is projected to increase by £3.4 billion (in 1995 prices) by 2030, contributing 2.0% of regional GDP, up from 1.8% in 1998.

Eastern

Passengers: 11.2 million terminal passengers in 1998 (7% of UK total).

Direct employment: 18,270 jobs located in region in 1998 (10% of UK direct employment in aviation, 0.9% of jobs in region). 19,650 jobs for residents of region (10% of these are in Greater London).

Total employment: direct, indirect and induced jobs from aviation account for 47,500 jobs in 1998 (2.2% of jobs in region).

Value-added: £1.0 billion in 1998 (1.6% of regional GDP).

Aviation-related activity in the region: The two major international airports are Luton and Stansted with smaller regional airports at Southend, Cambridge and Norwich. Significant maintenance operations exist at Southend and Cambridge. Britannia, Monarch and Easyjet all have headquarters at Luton.

Clusters and growth sectors: At a broad sectoral level, the region has a higher proportion of jobs relative to the UK average in agriculture than in any other sector. But the RDA sees future growth depending on

28 Information & communications technology, financial & business services, pharmaceuticals, high tech manufacturing, and transport gateways.

Importance of Aviation for Growth: · Offshore sector in southern N. Sea makes heavy use of Norwich airport (and accounts for an estimated 20% of its traffic).

· Research-related activities (eg Cambridge growth phenomenon) need ability for staff to travel frequently to discuss findings and keep up with latest developments.

· Air links important for overcoming perceived poor road transport links to part of the region for attracting inward investors.

· Direct employment in aviation is projected to rise by 20,000 by 2030, and total aviation-related employment is expected to rise by 54,000.

· Value-added in aviation is projected to increase by £3.7 billion (in 1995 prices) by 2030, contributing 3.1% of regional GDP, up from 1.6% in 1998.

South West

Passengers: 2.6 million terminal passengers in 1998 (2% of UK total).

Direct employment: 3,050 jobs located in region in 1998 (2% of UK direct employment in aviation, 0.2% of jobs in region). 3,860 jobs for residents of region (15% of these are in Greater London).

Total employment: direct, indirect and induced jobs from aviation account for 18,010 jobs in 1998 (0.9% of jobs in region).

Value-added: £0.2 billion in 1998 (0.3% of regional GDP).

Aviation-related activity in the region: Airports are at Bristol, Bournemouth International, Exeter, Gloucestershire, Penzance Heliport and Plymouth. Of these Bristol handled 70% of the regions passengers, Bournemouth 19% and Exeter 9%.

Clusters and growth sectors: relatively high concentrations of transport equipment and agriculture.

Importance of Aviation for Growth · Inward investment an importance source of economic activity - location for 10% of UK’s inward investment compared with 3% of UK’s population.

· With the Far East and the USA the most important sources of inward investment, air is the only practical way for travel between owners and inward investment sites.

· Aviation important to compensate for poor other transport links, at least to the west of the region.

· Existing inward investors have told the RDA they would have to move if air links were lost.

· Direct employment in aviation is projected to rise by 4,000 by 2030, and total aviation-related employment is expected to rise by 15,000.

· Value-added in aviation is projected to increase by £0.7 billion (in 1995 prices) by 2030, contributing 0.6% of regional GDP, up from 0.3% in 1998.

West Midlands

Passengers: 6.6 million terminal passengers in 1998 (4.2% of UK total). Although the main airport has good transport links, it is mainly used by passengers starting or finishing their journey within the region or the neighbouring East Midlands. 57% of UK business passengers using Birmingham Airport stated the West Midlands as their journey’s origin or destination and 26% the East Midlands, compared with 77% and 13% respectively for foreign business travel, with a similar distribution for leisure passengers.

Direct employment: 5,370 jobs located in region in 1998 (3% of UK direct employment in aviation, 0.3% of jobs in region). 5,850 jobs for residents of region.

Total employment: direct, indirect and induced jobs from aviation account for 22,910 jobs in 1998 (1.1% of jobs in region).

Value-added: £0.3 billion in 1998 (0.5% of regional GDP).

Aviation-related activity in the region: The region’s major airport is Birmingham International.

Clusters and growth sectors: Along with the East Midlands, the UK’s most manufacturing-intensive region, especially metal products, non-metallic minerals and transport equipment. Growth seen as dependent on automotive; ceramics; food & drink; engineering design; medical technology; tourism & leisure; creative, and distribution activities.

Importance of Aviation for Growth · Air freight important to more high-tech parts of manufacturing. Also sometimes needed by other parts of manufacturing for transporting samples quickly, even when not economic for full-scale outputs or inputs.

· With over 1900 overseas-owned companies in the region, business travel between parent companies and subsidiaries is important.

· Growing professional services sector making increasing use of air travel.

· Unique facilities of National Exhibition Centre/International Conference Centre heavily reliant on ease of access by air to be able to stage major events.

· Direct employment in aviation is projected to rise by 6,500 by 2030, and total aviation-related employment is expected to rise by 21,000.

· Value-added in aviation is projected to increase by £1.1 billion (in 1995 prices) by 2030, contributing 1.4% of regional GDP, up from 0.5% in 1998.

East Midlands

Passengers: 2.1 million terminal passengers in 1998 (1% of UK total). In addition, East Midlands Airport is the UK’s major hub for express and pure freight traffic.

Direct employment: 4,110 jobs located in region in 1998 (2% of UK direct employment in aviation, 0.2% of jobs in region). 4,310 jobs for residents of region.

Total employment: direct, indirect and induced jobs from aviation account for 18,340 jobs in 1998 (1.1% of jobs in region).

Value-added: £0.2 billion in 1998 (0.5% of regional GDP).

Aviation-related activity in the region: The region’s major airport is East Midlands, which accommodates the headquarters of British Midland. It also houses a major DHL air freight facility.

Clusters and growth sectors: Along with the West Midlands, the UK’s most manufacturing-intensive region, especially food drink & tobacco, textiles, and non-metallic minerals.

Importance of Aviation for Growth · Airport development seen as particularly important in persuading technology companies to establish new facilities in the region.

· A recent business park development has found several businesses expressing interest due to the site’s proximity to East Midlands Airport (2½ miles) - making it a major regional asset from an inward investment perspective.

· Direct employment in aviation is projected to rise by 5,500 by 2030, and total aviation-related employment is expected to rise by 17,000.

· Value-added in aviation is projected to increase by £0.9 billion (in 1995 prices) by 2030, contributing 1.1% of regional GDP, up from 0.5% in 1998.

Yorkshire and Humber

Passengers: 1.8 million terminal passengers in 1998 (1% of UK total). Many people use Manchester airport in the North West, because of easy accessibility, particularly from the western part of the West Yorkshire conurbation.

Direct employment: 2,120 jobs located in region in 1998 (1% of UK direct employment in aviation, 0.1% of jobs in region). 2,900 jobs for residents of region (5% of these are in the North West and 13% Greater London).

Total employment: direct, indirect and induced jobs from aviation account for 18,310 jobs in 1998 (0.9% of jobs in region).

Value-added: £0.1 billion in 1998 (0.2% of regional GDP).

Aviation-related activity in the region: The two main airports are Leeds/Bradford and Humberside.

Clusters and growth sectors: relatively high concentrations of food drink & tobacco, and metals. Regional Economic Strategy identifies key sectors of banking & insurance; chemicals, communication, creative, electronics, environmental, food & drink, healthcare, materials (including metals), textiles, tourism, and transport.

Importance of Aviation for Growth · Several key sectors benefit from good access to air services, though none are regarded as particularly dependent on them.

· Direct employment in aviation is projected to rise by 2,500 by 2030, and total aviation-related employment is expected to rise by 15,000.

· Value-added in aviation is projected to increase by £0.4 billion (in 1995 prices) by 2030, contributing 0.5% of regional GDP, up from 0.2% in 1998.

North East

Passengers: 3.5 million terminal passengers in 1998 (2% of UK total). The most heavily used domestic route in the region is between Newcastle and Heathrow. 435,000 passengers a year travel on this route and 45% of these take advantage of Heathrow’s international links.

Direct employment: 4,240 jobs located in region in 1998 (2% of UK direct employment in aviation, 0.5% of jobs in region). 4,660 jobs for residents of region.

Total employment: direct, indirect and induced jobs from aviation account for 12,670 jobs in 1998 (1.4% of jobs in region).

Value-added: £0.2 billion in 1998 (0.9% of regional GDP).

Aviation-related activity in the region: The two main airports are Newcastle and Teeside. British Airways operates a call centre in the North East.

Clusters and growth sectors: The region has the highest concentration of chemicals manufacturing in the UK.

Importance of Aviation for Growth · Inward investment has been critical to economic growth in the region in sectors such as cars and electronics.

· Ability to attract continuing inward investment likely to be affected by availability of air transport.

· Direct employment in aviation is projected to rise by 1,500 by 2030, and total aviation-related employment is expected to rise by 7,000.

· Value-added in aviation is projected to increase by £0.5 billion (in 1995 prices) by 2030, contributing 1.6% of regional GDP, up from 1.0% in 1998.

North West

Passengers: 18.2 million terminal passengers in 1998 (11.5% of UK total), including a significant number from outside of the region. 20% of UK and 16% of foreign business travellers using Manchester Airport stated their journey’s origin or destination as Yorkshire and Humber, compared with 64% and 71% respectively for the North West.

Direct employment: 18,100 jobs located in region in 1998 (10% of UK direct employment in aviation, 0.7% of jobs in region). 17,350 jobs for residents of region.

Total employment: direct, indirect and induced jobs from aviation account for 52,540 jobs in 1998 (2.0% of jobs in region).

Value-added: £1.0 billion in 1998 (1.4% of regional GDP).

Aviation-related activity in the region: The main airport in the region is Manchester, which handles 95% of passengers using the region’s airports. It also accommodates two maintenance facilities, with the headquarters of Airtours in the vicinity. The region also takes partial responsibility for national air traffic control with the Manchester Area Control Centre. USAirways has their European call centre located in the region.

Clusters and growth sectors: Relative concentrations of nuclear, chemicals and textiles industries. At a more detailed level, the RDA’s economic baseline report identifies textiles, paper, aerospace, pharmaceuticals and glass as manufacturing concentrations, and higher education and research centres as another regional specialism.

Importance of Aviation for Growth · Scheduled international flights seen as key to attracting new investment and supporting economic growth.

· Growth in aviation related activity seen as key to regeneration in Greater Manchester and the Mersey Belt.

· Direct employment in aviation is projected to rise by 12,500 by 2030, and total aviation-related employment is expected to rise by 38,000.

· Value-added in aviation is projected to increase by £2.7 billion (in 1995 prices) by 2030, contributing 2.7% of regional GDP, up from 1.4% in 1998.

Scotland

Passengers: 15 million terminal passengers in 1998 (9.5% of UK total).

Direct employment: 12,620 jobs located in region in 1998 (7% of UK direct employment in aviation, 0.6% of jobs in region). 12,950 jobs for residents of region. Scotland is the region with direct employment most dependent upon aviation activity at a national rather then regional level. 9% of direct employment relates to activity at a national level, 43% of these are employed in call centres with the remainder (over 650 people) in air traffic control centres.

Total employment: direct, indirect and induced jobs from aviation account for 28,620 jobs in 1998 (1.4% of jobs in region).

Value-added: £0.7 billion in 1998 (1.2% of regional GDP).

Aviation-related activity in the region: The major airports are at Aberdeen, Edinburgh and Glasgow, which handle 90% of the regions terminal passengers. Two air traffic control centres are located at

33 Prestwick: the Scottish Area Control Centre and the Oceanic Area Control Centre. Region also houses important express parcel delivery companies.

Clusters and growth sectors: Existing concentrations in oil & gas, semi-conductors, food & drink, biotechnology.

Importance of Aviation for Growth · Off-shore and biotechnology sectors make significant use of aviation for personnel. Semi-conductors noticeably reliant on air services for freight (c 50% of products sourced by air).

· Emerging clusters likely to depend on aviation include opto-electronics (freight requirements similar to semi-conductors); creative, media & software (where face-to-face networking will remain critical despite new technologies); and tourism (where there is a perceived need for more direct international flights from Scotland).

· Other sectors seen as important for growth that will require well-developed air transport services are financial services, aerospace, and logistics including express parcel delivery. (Forest products, on the other hand, which is also seen as a source of growth is unlikely to make much use of air transport!).

· Direct employment in aviation is projected to rise by 2,000 by 2030, and total aviation-related employment is expected to rise by 11,000.

· Value-added in aviation is projected to increase by £1.1 billion (in 1995 prices) by 2030, contributing 1.6% of regional GDP, up from 1.2% in 1998.

Wales

Passengers: 1.2 million terminal passengers in 1998 (1% of UK total).

Direct employment: 3,180 jobs located in region in 1998 (2% of UK direct employment in aviation, 0.3% of jobs in region). 3,330 jobs for residents of region.

Total employment: direct, indirect and induced jobs from aviation account for 9,180 jobs in 1998 (0.9% of jobs in region).

Value-added: £0.2 billion in 1998 (0.6% of regional GDP).

Aviation-related activity in the region: The main airport is Cardiff International, which accommodates a substantial British Airways maintenance facility for its 747 aircraft. North Wales is served by Manchester and Liverpool Airports.

Clusters and growth sectors: Relative concentrations of employment in electrical & optical equipment, miscellaneous manufacturing and agriculture.

Importance of Aviation for Growth

· Direct employment in aviation is projected to rise by 1,000 by 2030, and total aviation-related employment is expected to rise by 5,500.

34 · Value-added in aviation is projected to increase by £0.3 billion (in 1995 prices) by 2030, contributing 1.1% of regional GDP, up from 0.7% in 1998.

Northern Ireland

Passengers: 4 million terminal passengers in 1998 (3% of UK total).

Direct employment: 3,860 jobs located in region in 1998 (2% of UK direct employment in aviation, 0.6% of jobs in region). 4,070 jobs for residents of region.

Total employment: direct, indirect and induced jobs from aviation account for 8,840 jobs in 1998 (1.4% of jobs in region).

Value-added: £0.2 billion in 1998 (1.3% of regional GDP).

Aviation-related activity in the region: The two major airports are Belfast International and Belfast City and there is a small facility at Londonderry. Call centres are also active in the region adding to the region’s employment in aviation.

Clusters and growth sectors: Relatively dependent on agriculture, food drink & tobacco, textiles, and public administration. Tradeable services expected to be a growth sector, including software and call centres.

Importance of Aviation for Growth · Inward investors expect to see good links with London and the rest of the UK.

· Air particularly important for business travel given slowness of alternative.

· Direct employment in aviation is projected to be unchanged by 2030, while total aviation-related employment is expected to rise by 2,500.

· Value-added in aviation is projected to increase by £0.3 billion (in 1995 prices) by 2030, contributing 1.3% of regional GDP, compared with 1.4% in 1998.

35 III. Modelling alternative scenarios for aviation in the regions

As in the study of the impact of aviation on the national economy, OEF have built a simultaneous dynamic econometric model to enable analysis to be carried out of the combined effect of the various factors discussed on regional economies if different assumptions are made about passenger numbers. The employment projections set out in Chapter II are based on this modelling, although the key assumptions involved were set out for convenience in that chapter rather than just in the model description below. Just as the national model involved building an expanded version of OEF’s established UK Industry Model, so in this case we have expanded OEF’s established UK Regional Model17 to provide the necessary model structure as well as using it to estimate underlying regional economic growth.

(i) Scenario analysis – the data

The model we have designed requires two types of passenger data, which have different effects:

a) Time series for the number of terminal passengers using airports in each region

The model we have built uses a split into the five passenger types used in the ECS part 1 national study, that is (i) UK terminating business passengers, (ii) UK terminating leisure passengers, (iii) overseas terminating business passengers, (iv) overseas terminating leisure passengers, and (v) transfer passengers of all types.

b) Time series for the number of business passengers by region of origin or destination

These are needed because we believe the impact of aviation on regional competitiveness and productivity depends primarily on the use made of it by business passengers starting or finishing their journey in a particular region, rather than on those using a particular region’s airports.

Where possible we have used numbers from SPAM on the origin/destination of business passengers corresponding to the passenger projections assumed. For alternative scenarios where this is not possible the model uses the matrix below to produce assumptions about origin/destination numbers corresponding to alternative assumptions about passengers using a region’s airports.

Table 1: % of passengers in 2030 using airports in a given region who start or finish their journey in each region

Region of Origin/Destination NWMY Nth_EastYks_Humb WMidlnd EMidlnd GLondon Sth_East Sth_West Wales Scotland NIrelnd Eastern Total Region of airport NWMY 66.5 1.0 14.7 6.8 3.1 0.1 0.1 0.1 4.5 2.9 0.0 0.2 100.0 Nth_East 3.3 87.6 7.5 0.0 0.2 0.0 0.0 0.0 0.0 1.3 0.0 0.0 100.0 Yks_Humb 5.7 4.3 85.9 0.5 3.1 0.0 0.0 0.0 0.2 0.1 0.0 0.1 100.0 WMidlnd 3.7 0.7 2.4 61.8 16.6 0.9 3.9 4.8 1.9 2.3 0.0 1.0 100.0 EMidlnd 4.4 0.6 11.1 16.1 59.7 0.5 1.0 0.8 1.1 3.2 0.0 1.5 100.0 GLondon 3.2 2.6 2.4 2.1 1.7 47.3 24.2 3.9 1.2 4.9 0.0 6.6 100.0 Sth_East 2.3 1.6 0.7 1.1 0.9 37.6 39.3 5.4 0.4 4.6 0.0 6.1 100.0 Sth_West 0.0 0.0 0.0 0.2 0.0 0.4 11.4 87.5 0.3 0.0 0.0 0.1 100.0 Wales 0.2 0.0 0.0 1.4 0.1 0.2 0.3 3.9 93.9 0.0 0.0 0.0 100.0 Scotland 0.4 0.2 0.6 0.4 0.2 0.0 0.0 0.3 0.1 97.7 0.0 0.1 100.0 NIrelnd 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 0.0 100.0 Eastern 0.5 0.5 0.6 1.6 3.7 48.2 14.6 0.9 0.2 0.8 0.0 28.3 100.0

Total 8.0 3.6 4.6 6.2 3.8 31.9 18.4 3.9 1.7 8.4 1.8 7.8 100.0

36 (ii) Scenario Analysis – the model

Since the model is a simultaneous model in which all endogenous18 variables ultimately depend on every other variable in the system, a complete explanation is impossible. This also means the model is hard to describe diagrammatically. All the interactions in our standard regional model remain in the expanded version of the model built for analysing the impact of aviation, as well as the additional relationships modelled. We have nevertheless attempted to illustrate the key effects captured in the model below, and to spell out the interactions of the model that appear to be of most concern in as logical a way as possible, picking up on any points in which the approach used in the national (ECS Part 1) has been modified.

Passengers

(all passen gers) (business passengers) (business passengers)

Direct Price TFP effects

employment effects

Indirect Competitiveness Investment employment

Wage levels

Induced Employment Productivity

employment in other

sectors

Migration Output

The regions For the record, the regions covered by the model are the standard Government Office Regions, listed below with the counties they include:

South East: Berkshire, Buckinghamshire, East Sussex, Hampshire, Isle of Wight, Kent, Oxfordshire, Surrey and West Sussex Greater London Eastern: Bedfordshire, Cambridge, Essex, Hertfordshire, Norfolk and Suffolk. South West: Avon, Cornwall, Devon, Dorset, Gloucestershire, Somerset and Wiltshire. West Midlands: Hereford and Worcester, Shropshire, Staffordshire, Warwickshire and West Midlands. East Midlands: Derbyshire, Leicestershire, Lincolnshire, Northamptonshire and Nottinghamshire. Yorkshire and the Humber: Humberside, North Yorkshire, South Yorkshire and West Yorkshire. North West: Cheshire, Cumbria, Greater Manchester, Lancashire and Merseyside.

37 North East: Cleveland, Durham, Northumberland and Tyne and Wear. Wales: Clwyd, Dyfed, Gwent, Gwynedd, Mid Glamorgan, Powys, South Glamorgan and West Glamorgan. Scotland: Borders, Central, Dumfries and Galloway, Fife, Grampian, Highlands, Lothian, Orkney Islands, Shetlands, Strathclyde, Tayside and the Western Isles. Northern Ireland: Antrim, Armagh, Down, Fermanagh, Londonderry and Tyrone.

Direct employment Estimates of direct employment depend on the terminal passenger numbers described in the previous section on the data. The majority of jobs will be in the region of the airport used, but as discussed in previous progress reports, some jobs depend on aviation activity across the country as a whole rather than simply in the relevant region. To allow for this, we have used the matrices of direct employment discussed in Chapter I.

Indirect employment This follows the same approach as direct employment to the extent of applying a matrix based on the work described in Chapter I to the level of direct employment. Importantly, the multipliers involved are based on estimates of the long run relationship between direct and indirect jobs, rather than those pertaining in a particular year.

As in the Part 1 study, productivity growth in the supplying industries is assumed to be in line with that in the economy as a whole rather than in the aviation industry alone, so that the indirect employment multiplier increases over time as long as productivity growth in direct employment exceeds the economy average.

Induced employment Another application of a matrix described earlier in the study. Since induced employment is assumed to depend on the region of residence of direct and indirect employees rather than on their workplace, the model has to use the matrix relating residence-based employment to workplace-based employment, as well as the one relating this to induced employment.

Labour market interactions within and between regions One of the important issues discussed in the national study was that the equilibrium level of employment in the long run is not particularly affected by the demand for workers by any individual industry. This is a key feature of analysis using a fully-integrated simultaneous model rather than a simple input-output based model, and highlights the difference between the gross and net impacts of new developments. If an expanding industry increases the demand for labour sufficiently, this will, over time, put upward pressure on wages as firms compete for the available pool of workers, until the increase in wages, and any increases in interest rates as the Bank of England tries to curtail their inflationary impact, are sufficient to choke off the extra demand for labour. Conversely, if the demand for labour is below the available supply, over time there will be downward pressure on real wages and interest rates until the falling cost of employing people is sufficient to attract additional demand for labour.

The same argument does not apply in quite the same way at the regional level, for two reasons. First, increased wage pressure in any one region would not lead to a tightening of monetary policy if it were offset by lower wage pressure in another region. Second, migration of potential workers from an area of high unemployment to an area of low unemployment can help alleviate any changes in labour market pressures. (In principle, this effect can apply at the national level, with changes in net migration into or out of the UK. But international migration is on a much smaller scale relative to the available labour supply than inter- regional migration, and is unlikely to affect the analysis at the national level significantly.)

Even though the long-run level of employment in any particular region is not fixed in the same way that it is appropriate to assume it is fixed in the country as a whole, there are still important equilibrating mechanisms that need to be built into a regional model. First, to the extent that changes in the demand for labour are not met by changes in migration, there will be changes in wage pressure that will in turn affect employment in other industries by making the region more or less attractive to companies relative to other regions. Second, industrial and commercial rents in a region are likely to reflect the pressure of economic activity, and that in turn will also affect the incentives for companies to locate activity in one region rather than another. Third, migration depends partly on economic factors and will be affected by changes in the economic performance of different regions. These effects are picked up in the model by wages in a region being partly a function of unemployment in the region; rents depending on overall employment; employment being affected by cost competitiveness; and migration varying with relative unemployment.

Other effects Other effects on the model deliberately follow the approach in the national model very closely, but it may be worth re-emphasising a few here:

· Competitiveness effects from changes in the supply of aviation: The principle is that restrictions in the supply of air services put up costs for businesses, whether through directly higher fares, longer journey times as a result of lower frequency of service, or the need to find alternative ways to travel or transport freight. This in turn leads to a loss of competitiveness for those UK industries which make significant use of aviation, reflected in lower demand for British goods and services.

· The impact on productivity growth in the non-aviation parts of the economy. This was a key feature of the national results presented in our November 1999 study, based on the econometric work we carried out on the relationship between transport infrastructure and ‘total factor productivity’ growth in the rest of the economy19. Importantly, the impact on productivity from business travel is modelled as arising from trips starting or finishing in a region rather than passing through. The model assumes that the importance of this affect varies across sectors, as in the national model, but not across regions within the same sector. So any differences in its importance between regions depends on the sectoral mix within each region rather than on direct assumptions about regional differences.

· Investment effects: improvements in profitability from enhanced productivity can make additional investment more attractive. This may be one of the routes through which additional FDI can be attracted. As with the productivity effects discussed above, differences between regions arise from differences between sectors rather than direct assumptions about differences between regions.

39 Annex A: Supporting Tables

Table A.1 Direct employment in 1998 (see Section I(i) )

Table A.2 Indirect employment in 1998 (see Section I(iii) )

Table A.3 Induced employment in 1998 (see Section I(iii) )

Table A.4 Employment in tourism-related industries in 1998 (see Section I(iii) )

Table A.5 Passenger assumptions, millions (see Section II.A)

Table A.6 Passenger assumptions, % shares (see Section II.A)

Table A.7 Direct employment projections (see Section II.A)

Table A.8 Indirect employment projections (see Section II.A)

Table A.9 Induced employment projections (see Section II.A)

Table A.10 Total aviation-related employment projections (see Section II.A)

Table A.11 Total aviation-related employment projections - % of all employment (see Section II.A)

Table A.12 Aviation’s projected value-added (see Section II.A)

Table A.13 Aviation’s projected share of GDP (see Section II.A)

Table A.14 Regional concentration of industrial sectors (see Section II.B)

Table A1. Direct Employment Region of workplace

South East G. London Eastern South WestWest MidlandsEast MidlandsYorks and HumberNorth East North West Scotland Wales N. Ireland National* TOTAL South East 30483 33718 421 3 42 32 1 0 21 0 6 0 139 64868 Greater London 2843 34461 343 3 45 34 1 0 23 0 6 0 1622 39380 Region Eastern 370 2044 14862 2 27 21 1 0 14 0 4 0 2304 19648 of South West 203 568 0 2946 25 19 1 0 13 0 4 0 84 3864 residence West Midlands 92 411 124 2 4847 137 1 0 139 0 4 0 89 5846 East Midlands 3 72 16 1 180 3709 1 0 261 0 3 0 69 4314 Yorks and Humber 85 382 115 2 25 19 2025 0 157 0 4 0 82 2896 North East 40 177 52 1 11 9 0 3490 122 0 2 0 753 4656 North West & Merseyside 36 10 0 2 32 25 1 0 16569 0 5 0 672 17353 Scotland 70 196 0 2 25 19 1 0 13 11464 4 0 1154 12947 Wales 3 72 0 1 13 10 0 0 87 0 3098 0 43 3327 N. Ireland 28 126 36 1 8 6 0 0 4 0 1 3784 76 4070 National* 139 1622 2304 84 89 69 82 753 672 1154 43 76 - - 34395 73859 18274 3048 5369 4109 2115 4243 18095 12618 3183 3860 - TOTAL 183170 *Workers in jobs not allocated to individual airports are assumed to live in the region of their workplace

Table A2. Indirect Employment Region of direct employment

South East G. London Eastern South WestWest MidlandsEast MidlandsYorks and HumberNorth East North West Scotland Wales N. Ireland TOTAL South East 24623 24147 987 333 669 512 263 452 924 1433 209 447 54998 Greater London 8954 17539 4066 390 782 598 308 528 1080 1674 245 523 36685 Region Eastern 1791 3223 11596 214 429 328 169 290 592 918 134 287 19971 of indirect South West 895 3223 586 1708 397 304 156 268 549 851 124 266 9328 employment West Midlands 1705 1572 699 236 2774 169 187 320 1568 1015 148 317 10711 East Midlands 1791 1572 534 180 221 2123 143 245 1003 775 113 242 8941 Yorks and Humber 895 1021 564 190 382 292 941 98 5079 818 120 255 10656 North East 521 1021 214 72 477 111 57 1615 1035 310 149 97 5679 North West & Merseyside 1343 1021 704 238 145 365 188 322 18718 1022 45 319 24430 Scotland 1257 333 515 174 349 267 138 236 483 5573 109 234 9668 Wales 641 333 263 89 178 136 70 120 188 382 846 119 3366 N. Ireland 353 57 145 49 98 75 39 66 135 210 31 1840 3097 44769 55062 20871 3874 6900 5280 2657 4561 31354 14982 2274 4945 TOTAL 197530

Table A3. Induced Employment Region that generates employment

South East G. London Eastern South WestWest MidlandsEast MidlandsYorks and HumberNorth East North West Scotland Wales N. Ireland TOTAL South East 17097 1341 698 233 292 234 239 182 737 399 118 126 21695 Greater London 2470 11075 816 272 341 273 279 213 861 466 138 148 17352 Region Eastern 1355 860 5400 149 187 150 153 117 472 256 76 81 9255 of South West 1255 796 415 1787 173 139 142 108 437 237 70 75 5635 employment West Midlands 1498 951 495 165 2277 166 169 129 522 283 84 90 6827 East Midlands 1144 726 378 126 158 1783 129 99 399 216 64 68 5290 Yorks and Humber 1207 766 399 133 167 133 1830 104 421 228 67 72 5528 North East 458 290 151 50 63 51 52 1331 160 86 26 27 2746 North West & Merseyside 1507 957 498 166 208 167 170 130 5748 284 84 90 10011 Scotland 1104 700 365 121 152 122 125 95 385 3035 62 66 6332 Wales 563 357 186 62 78 62 64 49 196 106 868 34 2625 N. Ireland 310 197 102 34 43 34 35 27 108 58 17 914 1880 29967 19016 9905 3298 4139 3314 3388 2584 10446 5654 1673 1792 Total 95175

Table A4: EMPLOYEE JOBS BY CLASS BY REGION, September 1998

Travel Short Agencies & Stay Tour Libraries Sport & Total Hotels Accommodation Restaurants Bars Operators & Museums Recreation 551 552 553 554 633 925926/927 Standard region All South East 90,678 9,547 162,064 125,921 50,593 26,393 107,525 572,721 Greater London 46,060 1,356 94,174 45,707 30,201 11,862 42,338 271,698 East Anglia 9,821 4,475 10,840 14,752 2,850 2,632 12,746 58,116 South West 33,312 11,550 28,792 39,618 6,018 7,663 23,987 150,940 West Midlands 19,979 867 25,355 44,175 6,061 6,150 23,986 126,573 East Midlands 14,065 4,133 19,134 36,411 5,169 4,154 21,553 104,619 Yorkshire & Humberside 17,084 2,495 27,363 45,036 5,828 6,426 29,094 133,326 North West 25,297 2,259 33,896 59,049 11,652 6,822 33,596 172,571 North 15,404 1,995 15,380 27,340 3,796 4,053 16,692 84,660 Wales 12,212 4,867 13,849 19,682 2,880 3,307 15,288 72,085 Scotland 39,871 4,958 32,918 33,642 6,933 8,464 33,805 160,591

Great Britain 277,723 47,146 369,591 445,626 101,780 76,064 318,272 1,636,202

GOR region South East 33,374 6,127 50,782 60,000 14,947 10,680 47,912 223,823 Eastern 21,065 6,539 27,948 34,966 8,295 6,483 30,021 135,316 North East 11,630 1,506 11,612 20,642 3,128 3,453 14,222 66,192 North West 29,071 2,748 37,664 65,747 12,320 7,422 36,066 191,039

Sources: ONS (standard regions); OEF estimates (GOR regions)

44 Table A5: Total terminal passengers, millions

S.East G.London Eastern S.West W.Mid. E.Mid Yks&Hu. Nw&My N.East Wales Scot. N.I. UK

1998 29.6 60.3 11.4 2.4 6.6 2.1 1.7 17.8 3.5 1.2 13.3 3.8 153.8 1999 31.3 62.2 12.7 2.7 7.3 2.5 2.0 19.2 3.8 1.4 13.9 4.1 163.0 2000 32.9 65.4 13.5 2.8 7.7 2.8 2.1 20.3 4.1 1.6 14.6 4.1 171.9 2001 34.5 67.4 14.6 3.0 8.2 3.1 2.2 21.8 4.3 1.7 15.4 4.3 180.5 2002 35.7 68.2 16.3 3.1 8.8 3.1 2.4 23.2 4.5 1.8 16.1 4.4 187.7 2003 35.8 69.4 18.0 3.3 9.5 3.1 2.6 24.6 4.8 1.9 16.7 4.6 194.1 2004 35.6 71.6 19.3 3.5 10.4 3.2 2.7 26.0 5.0 2.0 17.4 4.7 201.4 2005 35.6 72.9 21.2 3.8 10.4 3.2 2.8 27.9 5.3 2.1 18.0 4.9 208.2 2006 35.8 75.3 25.3 4.1 10.5 3.3 2.9 29.8 5.5 2.2 18.8 5.0 218.5 2007 36.5 77.4 28.3 4.4 12.1 3.9 3.0 31.0 5.7 2.3 19.5 5.2 229.2 2008 39.5 78.7 30.8 4.6 13.3 4.3 3.1 32.2 5.9 2.4 20.3 5.3 240.5 2009 42.9 80.8 33.3 4.8 14.1 4.7 3.2 33.4 6.2 2.4 21.2 5.5 252.5 2010 45.3 83.9 35.8 4.9 14.9 5.1 3.3 34.9 6.5 2.5 22.1 5.6 264.9 2011 47.0 86.3 37.4 5.4 16.1 5.6 3.8 36.2 7.0 2.6 23.3 5.9 276.5 2012 48.0 88.8 40.1 5.7 17.2 6.0 4.0 37.9 7.3 2.7 24.4 6.1 288.1 2013 48.1 91.0 44.3 6.0 17.5 6.4 4.4 39.9 7.6 2.8 25.4 6.3 299.7 2014 47.9 94.1 48.5 6.3 17.5 6.9 4.7 42.1 8.0 2.9 26.5 6.5 311.9 2015 47.6 97.6 52.9 6.6 17.5 7.5 5.1 44.5 8.3 3.0 27.6 6.7 324.8 2016 54.7 97.8 53.5 6.6 18.9 7.5 5.2 45.7 8.6 3.0 28.6 6.9 337.1 2017 65.8 96.9 52.1 6.7 19.9 7.6 5.4 47.2 8.9 3.1 29.6 7.1 350.3 2018 68.1 100.1 54.1 6.8 21.0 7.8 5.6 49.0 9.2 3.3 30.7 7.3 363.1 2019 69.8 102.9 57.0 7.2 22.2 8.0 5.9 50.9 9.5 3.4 31.8 7.5 376.0 2020 71.3 105.2 59.9 7.5 23.5 8.3 6.2 52.9 9.8 3.5 32.6 7.7 388.6 2021 71.1 107.4 61.4 8.1 25.1 8.5 6.7 54.2 10.2 3.6 33.2 7.9 397.4 2022 71.4 110.2 62.8 8.5 26.3 8.6 7.1 55.4 10.4 3.7 33.4 8.0 405.9 2023 72.4 113.4 62.6 9.0 27.8 8.8 7.4 56.8 10.6 3.8 33.6 8.1 414.4 2024 73.4 116.7 62.6 9.5 29.0 9.1 7.6 58.3 10.9 3.9 33.9 8.3 423.2 2025 73.6 120.4 62.4 10.2 30.1 9.6 7.9 60.1 11.1 4.1 34.2 8.4 432.0 2026 77.0 121.5 62.1 10.5 30.4 10.0 8.0 61.5 11.3 4.2 34.5 8.5 439.5 2027 80.8 121.7 62.0 10.9 30.9 10.3 8.2 63.1 11.5 4.3 34.9 8.7 447.2 2028 81.5 123.4 61.8 11.4 31.7 10.9 8.3 64.9 11.7 4.5 35.2 8.8 454.0 2029 82.2 124.5 61.9 12.1 32.5 11.6 8.5 66.7 11.9 4.6 35.5 8.9 460.9 2030 83.2 125.2 61.9 13.0 33.0 12.5 8.7 68.6 12.0 4.8 35.9 9.0 467.8

Table A6: Share of passengers (%)

S.East G.London Eastern S.West W.Mid. E.Mid Yks&Hu. Nw&My N.East Wales Scot. N.I. UK

1998 19.2 39.2 7.4 1.6 4.3 1.4 1.1 11.6 2.3 0.8 8.6 2.5 100.0 1999 19.2 38.1 7.8 1.7 4.5 1.5 1.2 11.8 2.3 0.9 8.5 2.5 100.0 2000 19.2 38.1 7.8 1.6 4.5 1.6 1.2 11.8 2.4 0.9 8.5 2.4 100.0 2001 19.1 37.3 8.1 1.7 4.5 1.7 1.2 12.1 2.4 0.9 8.5 2.4 100.0 2002 19.0 36.4 8.7 1.7 4.7 1.6 1.3 12.4 2.4 0.9 8.6 2.4 100.0 2003 18.4 35.8 9.3 1.7 4.9 1.6 1.3 12.7 2.5 1.0 8.6 2.3 100.0 2004 17.7 35.6 9.6 1.8 5.2 1.6 1.3 12.9 2.5 1.0 8.6 2.3 100.0 2005 17.1 35.0 10.2 1.8 5.0 1.5 1.3 13.4 2.5 1.0 8.7 2.3 100.0 2006 16.4 34.5 11.6 1.9 4.8 1.5 1.3 13.6 2.5 1.0 8.6 2.3 100.0 2007 15.9 33.8 12.3 1.9 5.3 1.7 1.3 13.5 2.5 1.0 8.5 2.3 100.0 2008 16.4 32.7 12.8 1.9 5.5 1.8 1.3 13.4 2.5 1.0 8.5 2.2 100.0 2009 17.0 32.0 13.2 1.9 5.6 1.9 1.3 13.2 2.4 1.0 8.4 2.2 100.0 2010 17.1 31.7 13.5 1.9 5.6 1.9 1.3 13.2 2.4 0.9 8.3 2.1 100.0 2011 17.0 31.2 13.5 1.9 5.8 2.0 1.4 13.1 2.5 0.9 8.4 2.1 100.0 2012 16.7 30.8 13.9 2.0 6.0 2.1 1.4 13.1 2.5 0.9 8.5 2.1 100.0 2013 16.1 30.4 14.8 2.0 5.8 2.1 1.5 13.3 2.5 0.9 8.5 2.1 100.0 2014 15.4 30.2 15.5 2.0 5.6 2.2 1.5 13.5 2.6 0.9 8.5 2.1 100.0 2015 14.6 30.0 16.3 2.0 5.4 2.3 1.6 13.7 2.6 0.9 8.5 2.1 100.0 2016 16.2 29.0 15.9 2.0 5.6 2.2 1.5 13.6 2.5 0.9 8.5 2.0 100.0 2017 18.8 27.7 14.9 1.9 5.7 2.2 1.5 13.5 2.5 0.9 8.5 2.0 100.0 2018 18.8 27.6 14.9 1.9 5.8 2.1 1.5 13.5 2.5 0.9 8.4 2.0 100.0 2019 18.6 27.4 15.2 1.9 5.9 2.1 1.6 13.5 2.5 0.9 8.5 2.0 100.0 2020 18.3 27.1 15.4 1.9 6.1 2.1 1.6 13.6 2.5 0.9 8.4 2.0 100.0 2021 17.9 27.0 15.4 2.0 6.3 2.1 1.7 13.6 2.6 0.9 8.3 2.0 100.0 2022 17.6 27.1 15.5 2.1 6.5 2.1 1.7 13.6 2.6 0.9 8.2 2.0 100.0 2023 17.5 27.4 15.1 2.2 6.7 2.1 1.8 13.7 2.6 0.9 8.1 2.0 100.0 2024 17.3 27.6 14.8 2.2 6.9 2.1 1.8 13.8 2.6 0.9 8.0 2.0 100.0 2025 17.0 27.9 14.5 2.4 7.0 2.2 1.8 13.9 2.6 0.9 7.9 1.9 100.0 2026 17.5 27.7 14.1 2.4 6.9 2.3 1.8 14.0 2.6 0.9 7.8 1.9 100.0 2027 18.1 27.2 13.9 2.4 6.9 2.3 1.8 14.1 2.6 1.0 7.8 1.9 100.0 2028 17.9 27.2 13.6 2.5 7.0 2.4 1.8 14.3 2.6 1.0 7.7 1.9 100.0 2029 17.8 27.0 13.4 2.6 7.0 2.5 1.8 14.5 2.6 1.0 7.7 1.9 100.0 2030 17.8 26.8 13.2 2.8 7.1 2.7 1.9 14.7 2.6 1.0 7.7 1.9 100.0

45 Table A7 Direct Employment, '000s

S.East G.London Eastern S.West W.Mid. E.Mid Yks&Hu. Nw&My N.East Wales Scot. N.I. UK

1998 34.4 73.9 18.3 3.0 5.4 4.1 2.1 18.1 4.2 3.2 12.6 3.9 183.2 1999 34.7 72.5 19.1 3.2 5.7 4.4 2.3 18.6 4.3 3.3 12.5 3.9 184.5 2000 35.0 73.0 19.2 3.2 5.7 4.7 2.3 18.8 4.4 3.4 12.6 3.7 186.1 2001 35.3 72.4 19.9 3.3 5.9 5.0 2.4 19.4 4.5 3.5 12.7 3.8 187.9 2002 35.5 71.3 21.2 3.3 6.1 4.9 2.5 20.1 4.5 3.5 12.9 3.8 189.7 2003 34.8 71.0 22.6 3.4 6.5 4.8 2.6 20.8 4.6 3.5 13.0 3.8 191.5 2004 33.7 71.4 23.6 3.6 6.9 4.8 2.6 21.4 4.7 3.6 13.2 3.9 193.4 2005 33.1 71.1 25.0 3.8 6.8 4.8 2.7 22.4 4.8 3.7 13.4 3.9 195.4 2006 32.1 70.8 28.1 3.9 6.5 4.7 2.7 23.0 4.9 3.7 13.4 3.9 197.7 2007 31.5 70.1 30.0 4.1 7.3 5.2 2.6 23.1 4.8 3.6 13.4 3.9 199.7 2008 32.9 68.8 31.3 4.1 7.7 5.6 2.7 23.1 4.8 3.6 13.4 3.8 201.8 2009 34.5 68.0 32.4 4.1 7.9 5.8 2.7 23.1 4.8 3.6 13.4 3.8 204.0 2010 35.1 68.1 33.4 4.1 8.1 6.1 2.7 23.2 4.8 3.6 13.5 3.8 206.3 2011 35.3 67.9 33.8 4.3 8.4 6.4 2.9 23.4 5.0 3.6 13.8 3.8 208.7 2012 35.1 68.0 35.1 4.4 8.7 6.6 3.0 23.8 5.1 3.6 14.0 3.9 211.3 2013 34.3 67.9 37.6 4.5 8.7 6.9 3.2 24.4 5.1 3.6 14.2 3.9 214.4 2014 33.3 68.5 39.9 4.7 8.5 7.2 3.4 25.2 5.2 3.7 14.4 3.9 217.8 2015 32.3 69.3 42.2 4.8 8.3 7.6 3.5 25.9 5.3 3.7 14.6 3.9 221.6 2016 36.5 68.2 42.0 4.7 8.8 7.5 3.6 26.1 5.4 3.7 14.8 3.9 225.0 2017 43.0 66.3 40.4 4.6 9.1 7.4 3.6 26.5 5.4 3.8 15.0 4.0 229.1 2018 43.7 67.2 41.1 4.7 9.4 7.4 3.7 27.0 5.5 3.9 15.3 4.0 232.9 2019 44.0 67.9 42.5 4.8 9.7 7.5 3.8 27.5 5.6 3.9 15.5 4.1 236.8 2020 44.2 68.2 43.8 4.9 10.1 7.7 3.9 28.1 5.7 4.0 15.7 4.1 240.4 2021 43.3 68.3 44.0 5.2 10.6 7.7 4.2 28.2 5.8 4.0 15.6 4.1 241.1 2022 42.7 68.8 44.2 5.4 10.9 7.7 4.3 28.3 5.8 4.0 15.4 4.1 241.7 2023 42.5 69.5 43.4 5.6 11.3 7.7 4.4 28.5 5.8 4.0 15.3 4.1 242.1 2024 42.3 70.2 42.7 5.8 11.6 7.8 4.5 28.8 5.8 4.0 15.1 4.1 242.6 2025 41.6 71.1 41.9 6.1 11.8 8.1 4.5 29.1 5.8 4.1 14.9 4.1 243.1 2026 42.8 70.6 41.1 6.2 11.8 8.2 4.6 29.3 5.8 4.1 14.8 4.1 243.3 2027 44.2 69.5 40.4 6.3 11.8 8.3 4.6 29.5 5.8 4.2 14.7 4.1 243.4 2028 43.8 69.3 39.7 6.5 11.8 8.6 4.6 29.9 5.8 4.2 14.6 4.1 242.9 2029 43.5 68.8 39.1 6.8 11.9 9.0 4.6 30.2 5.8 4.2 14.5 4.0 242.5 2030 43.3 68.0 38.6 7.2 11.9 9.5 4.6 30.5 5.7 4.2 14.4 4.0 242.1

Table A8 Indirect Employment, '000s

S.East G.London Eastern S.West W.Mid. E.Mid Yks&Hu. Nw&My N.East Wales Scot. N.I. UK

1998 55.4 36.9 20.3 9.4 10.6 8.9 9.5 19.7 5.6 4.1 9.8 3.2 193.4 1999 56.3 37.7 21.4 9.7 11.1 9.3 10.0 20.6 5.8 4.3 10.1 3.3 199.8 2000 56.9 38.1 21.7 9.8 11.2 9.6 10.1 20.9 6.0 4.4 10.2 3.2 202.2 2001 56.6 38.0 22.1 9.9 11.3 9.7 10.3 21.3 6.0 4.4 10.3 3.2 203.1 2002 56.5 38.3 23.2 10.0 11.5 9.8 10.5 21.9 6.1 4.4 10.5 3.3 205.9 2003 56.6 38.9 24.5 10.2 12.0 9.9 10.9 22.8 6.3 4.5 10.7 3.3 210.6 2004 57.1 39.8 25.7 10.6 12.5 10.1 11.3 23.7 6.5 4.7 11.1 3.4 216.4 2005 57.3 40.5 27.2 10.9 12.7 10.3 11.8 25.0 6.7 4.8 11.4 3.5 222.0 2006 57.2 41.4 29.9 11.2 12.9 10.5 12.1 25.8 6.8 4.9 11.6 3.5 227.7 2007 57.4 42.3 31.7 11.5 13.5 10.9 12.4 26.3 7.0 5.0 11.8 3.6 233.5 2008 58.7 43.2 33.2 11.7 14.0 11.3 12.7 26.7 7.1 5.1 12.1 3.7 239.4 2009 60.3 44.2 34.5 11.9 14.4 11.7 12.9 27.1 7.3 5.2 12.4 3.7 245.5 2010 61.7 45.3 35.9 12.1 14.7 12.1 13.2 27.6 7.4 5.3 12.6 3.8 251.8 2011 62.8 46.3 36.8 12.6 15.3 12.5 13.6 28.3 7.7 5.5 13.1 3.9 258.4 2012 63.6 47.3 38.4 12.9 15.8 12.9 14.1 29.1 7.9 5.6 13.5 4.0 265.2 2013 63.8 48.4 40.9 13.3 16.1 13.3 14.5 30.1 8.1 5.7 13.8 4.1 272.3 2014 64.2 49.6 43.3 13.7 16.3 13.8 15.1 31.2 8.3 5.9 14.2 4.2 279.7 2015 64.5 50.8 45.8 14.1 16.6 14.3 15.6 32.4 8.5 6.0 14.6 4.2 287.3 2016 67.9 52.0 46.0 14.2 17.2 14.5 15.9 32.9 8.7 6.1 15.0 4.3 294.7 2017 72.8 53.2 45.1 14.3 17.7 14.9 16.2 33.5 8.9 6.3 15.4 4.4 302.6 2018 74.4 54.4 46.2 14.6 18.2 15.1 16.6 34.3 9.1 6.5 15.7 4.5 309.6 2019 75.5 55.6 47.7 14.9 18.7 15.4 17.0 35.1 9.3 6.6 16.1 4.6 316.5 2020 76.2 56.5 49.1 15.2 19.2 15.7 17.4 35.9 9.5 6.7 16.4 4.7 322.7 2021 75.9 56.7 49.6 15.5 19.6 15.8 17.7 36.2 9.7 6.8 16.5 4.7 324.7 2022 75.8 56.9 49.9 15.8 19.9 15.9 17.8 36.4 9.7 6.8 16.4 4.8 326.2 2023 76.3 57.1 49.5 16.0 20.2 16.0 18.0 36.7 9.8 6.9 16.4 4.8 327.6 2024 76.6 57.3 49.1 16.2 20.4 16.1 18.2 37.0 9.9 6.9 16.4 4.8 328.9 2025 76.7 57.4 48.6 16.5 20.6 16.3 18.4 37.4 10.0 7.0 16.4 4.8 330.1 2026 77.5 57.4 48.0 16.5 20.6 16.4 18.4 37.6 10.0 7.0 16.4 4.8 330.6 2027 78.2 57.4 47.4 16.6 20.7 16.5 18.5 37.8 10.0 7.0 16.3 4.8 331.2 2028 77.8 57.1 46.8 16.7 20.7 16.7 18.6 38.2 10.1 7.1 16.3 4.8 330.8 2029 77.4 56.8 46.4 16.9 20.8 16.9 18.7 38.5 10.1 7.1 16.3 4.8 330.4 2030 76.9 56.4 45.8 17.1 20.8 17.2 18.8 38.7 10.1 7.1 16.2 4.8 329.8

46 Table A9: Induced Employment, '000s

S.East G.London Eastern S.West W.Mid. E.Mid Yks&Hu. Nw&My N.East Wales Scot. N.I. UK

1998 21.8 17.2 9.2 5.6 6.8 5.2 5.4 9.4 2.7 2.7 6.3 1.9 94.1 1999 22.0 17.4 9.5 5.7 7.0 5.4 5.5 9.6 2.8 2.8 6.4 1.9 96.1 2000 22.2 17.6 9.7 5.8 7.0 5.5 5.6 9.8 2.8 2.8 6.5 1.9 97.1 2001 22.2 17.6 9.8 5.8 7.1 5.6 5.6 9.9 2.9 2.8 6.5 1.9 97.8 2002 22.2 17.6 10.1 5.9 7.2 5.6 5.7 10.1 2.9 2.9 6.6 1.9 98.9 2003 22.3 17.8 10.6 6.0 7.4 5.7 5.8 10.4 3.0 2.9 6.7 2.0 100.5 2004 22.4 18.1 10.9 6.2 7.6 5.8 6.0 10.7 3.0 3.0 6.8 2.0 102.5 2005 22.4 18.3 11.3 6.3 7.7 5.9 6.1 11.1 3.1 3.0 7.0 2.0 104.4 2006 22.5 18.6 12.1 6.4 7.8 6.0 6.2 11.3 3.1 3.1 7.1 2.1 106.3 2007 22.5 18.8 12.7 6.6 8.1 6.2 6.4 11.5 3.2 3.1 7.2 2.1 108.3 2008 22.9 19.0 13.1 6.7 8.3 6.4 6.5 11.6 3.2 3.2 7.3 2.1 110.3 2009 23.4 19.3 13.5 6.8 8.5 6.5 6.6 11.8 3.3 3.2 7.4 2.1 112.4 2010 23.8 19.6 13.8 6.9 8.6 6.7 6.7 12.0 3.3 3.3 7.5 2.2 114.5 2011 24.1 19.9 14.1 7.1 8.9 6.8 6.9 12.2 3.4 3.3 7.7 2.2 116.8 2012 24.4 20.3 14.6 7.3 9.1 7.0 7.1 12.5 3.5 3.4 7.9 2.2 119.1 2013 24.5 20.6 15.3 7.4 9.2 7.2 7.2 12.8 3.6 3.5 8.0 2.3 121.7 2014 24.7 21.0 16.0 7.6 9.4 7.4 7.4 13.2 3.7 3.5 8.2 2.3 124.4 2015 24.8 21.4 16.7 7.8 9.5 7.6 7.6 13.6 3.7 3.6 8.4 2.4 127.2 2016 25.8 21.8 16.8 7.9 9.8 7.7 7.8 13.8 3.8 3.7 8.6 2.4 129.9 2017 27.3 22.1 16.6 8.0 10.1 7.9 8.0 14.0 3.9 3.8 8.7 2.5 132.9 2018 27.8 22.6 17.0 8.2 10.3 8.0 8.1 14.3 4.0 3.9 8.9 2.5 135.6 2019 28.2 23.0 17.5 8.4 10.5 8.2 8.3 14.6 4.0 3.9 9.1 2.6 138.3 2020 28.5 23.3 17.9 8.5 10.8 8.3 8.5 14.9 4.1 4.0 9.2 2.6 140.8 2021 28.4 23.4 18.0 8.6 10.9 8.4 8.6 15.0 4.2 4.0 9.3 2.6 141.4 2022 28.4 23.5 18.1 8.7 11.0 8.4 8.6 15.1 4.2 4.0 9.3 2.6 142.0 2023 28.5 23.6 18.0 8.8 11.1 8.4 8.7 15.2 4.2 4.1 9.3 2.6 142.4 2024 28.6 23.7 17.9 8.8 11.2 8.5 8.7 15.3 4.2 4.1 9.2 2.6 142.9 2025 28.6 23.8 17.8 8.9 11.3 8.6 8.8 15.4 4.2 4.1 9.2 2.6 143.3 2026 28.8 23.8 17.6 9.0 11.3 8.6 8.8 15.4 4.2 4.1 9.2 2.6 143.5 2027 29.0 23.7 17.4 9.0 11.3 8.6 8.8 15.5 4.2 4.1 9.2 2.6 143.7 2028 28.9 23.7 17.3 9.0 11.3 8.7 8.8 15.6 4.2 4.1 9.2 2.6 143.4 2029 28.8 23.6 17.1 9.1 11.3 8.7 8.8 15.6 4.2 4.1 9.2 2.6 143.2 2030 28.6 23.5 17.0 9.1 11.3 8.8 8.8 15.7 4.2 4.1 9.1 2.6 143.0

47 Table A10: Total Aviation-related Employment, '000s

S.East G.London Eastern S.West W.Mid. E.Mid Yks&Hu. Nw&My N.East Wales Scot. N.I. UK

1998 111.6 127.9 47.8 18.0 22.7 18.3 17.0 47.2 12.6 10.0 28.8 8.9 470.7 1999 113.0 127.6 50.0 18.7 23.7 19.2 17.9 48.8 13.0 10.4 29.1 9.1 480.4 2000 114.0 128.7 50.6 18.9 24.0 19.8 18.0 49.5 13.2 10.6 29.2 8.9 485.4 2001 114.1 128.0 51.8 19.0 24.3 20.3 18.3 50.6 13.3 10.7 29.6 8.9 488.8 2002 114.2 127.2 54.6 19.2 24.9 20.3 18.7 52.1 13.5 10.8 30.0 9.0 494.5 2003 113.7 127.7 57.7 19.6 25.8 20.5 19.4 53.9 13.9 11.0 30.5 9.1 502.7 2004 113.2 129.3 60.2 20.3 27.0 20.8 19.9 55.8 14.3 11.2 31.1 9.3 512.3 2005 112.8 129.9 63.5 21.0 27.2 21.0 20.6 58.4 14.7 11.5 31.7 9.4 521.8 2006 111.7 130.8 70.1 21.5 27.2 21.2 21.1 60.2 14.8 11.6 32.0 9.5 531.7 2007 111.4 131.2 74.4 22.2 28.9 22.3 21.4 60.9 15.0 11.8 32.4 9.5 541.4 2008 114.5 131.0 77.5 22.5 30.0 23.3 21.8 61.4 15.2 11.9 32.8 9.6 551.5 2009 118.2 131.5 80.3 22.8 30.7 24.1 22.1 62.0 15.3 12.0 33.2 9.6 561.9 2010 120.6 133.0 83.1 23.1 31.4 24.8 22.5 62.9 15.6 12.2 33.6 9.7 572.6 2011 122.2 134.2 84.8 24.0 32.6 25.8 23.4 63.9 16.1 12.4 34.6 9.9 583.8 2012 123.0 135.6 88.1 24.6 33.6 26.5 24.1 65.4 16.5 12.6 35.3 10.1 595.6 2013 122.6 137.0 93.8 25.3 34.0 27.4 25.0 67.4 16.9 12.8 36.1 10.2 608.4 2014 122.2 139.2 99.1 26.0 34.2 28.4 25.9 69.6 17.2 13.1 36.8 10.4 621.9 2015 121.7 141.6 104.7 26.6 34.4 29.5 26.8 71.9 17.6 13.3 37.6 10.5 636.1 2016 130.2 142.0 104.7 26.8 35.8 29.8 27.2 72.8 17.9 13.5 38.3 10.7 649.6 2017 143.0 141.6 102.1 26.9 36.8 30.2 27.8 74.0 18.2 13.9 39.2 10.9 664.6 2018 145.9 144.2 104.3 27.4 37.9 30.6 28.4 75.6 18.6 14.2 39.9 11.1 678.1 2019 147.7 146.4 107.7 28.1 39.0 31.1 29.1 77.2 19.0 14.5 40.7 11.3 691.7 2020 148.9 148.0 110.9 28.7 40.2 31.7 29.8 78.9 19.3 14.7 41.3 11.4 703.8 2021 147.6 148.4 111.6 29.4 41.1 31.9 30.4 79.5 19.6 14.8 41.3 11.5 707.2 2022 146.9 149.3 112.3 29.8 41.8 32.0 30.8 79.8 19.7 14.9 41.1 11.5 709.9 2023 147.3 150.3 110.8 30.4 42.6 32.1 31.2 80.4 19.8 15.0 40.9 11.5 712.1 2024 147.5 151.2 109.6 30.9 43.3 32.3 31.4 81.0 19.9 15.0 40.7 11.5 714.4 2025 146.9 152.3 108.2 31.5 43.7 32.9 31.7 81.8 20.0 15.2 40.6 11.5 716.5 2026 149.1 151.8 106.6 31.7 43.7 33.3 31.8 82.3 20.0 15.2 40.4 11.5 717.4 2027 151.4 150.6 105.2 31.9 43.7 33.5 31.8 82.9 20.1 15.3 40.3 11.5 718.3 2028 150.6 150.1 103.8 32.2 43.9 34.0 31.9 83.6 20.1 15.4 40.1 11.5 717.2 2029 149.6 149.1 102.6 32.8 44.0 34.7 32.1 84.2 20.1 15.4 39.9 11.5 716.1 2030 148.8 147.9 101.4 33.4 44.0 35.5 32.2 84.9 20.0 15.5 39.8 11.4 714.9

Table A11: Aviation-related employment as share of total (%)

S.East G.London Eastern S.West W.Mid. E.Mid Yks&Hu. Nw&My N.East Wales Scot. N.I. UK

1998 3.3 3.6 2.3 0.9 1.1 1.1 0.9 1.8 1.4 1.0 1.4 1.5 2.0 1999 3.3 3.6 2.3 0.9 1.1 1.2 0.9 1.9 1.5 1.0 1.5 1.5 2.0 2000 3.4 3.6 2.4 0.9 1.1 1.2 0.9 2.0 1.5 1.1 1.5 1.5 2.0 2001 3.4 3.6 2.4 1.0 1.2 1.2 0.9 2.0 1.5 1.1 1.5 1.5 2.1 2002 3.3 3.6 2.5 1.0 1.2 1.2 1.0 2.1 1.6 1.1 1.5 1.5 2.1 2003 3.3 3.6 2.7 1.0 1.2 1.2 1.0 2.1 1.6 1.1 1.5 1.5 2.1 2004 3.2 3.6 2.7 1.0 1.3 1.2 1.0 2.2 1.6 1.1 1.6 1.5 2.1 2005 3.2 3.6 2.9 1.0 1.3 1.2 1.0 2.3 1.7 1.1 1.6 1.5 2.2 2006 3.1 3.6 3.1 1.0 1.3 1.2 1.1 2.3 1.7 1.2 1.6 1.5 2.2 2007 3.1 3.6 3.3 1.0 1.3 1.3 1.1 2.4 1.7 1.2 1.6 1.5 2.2 2008 3.1 3.6 3.4 1.1 1.4 1.3 1.1 2.4 1.7 1.2 1.6 1.5 2.2 2009 3.2 3.6 3.5 1.1 1.4 1.4 1.1 2.4 1.7 1.2 1.6 1.5 2.3 2010 3.2 3.6 3.6 1.1 1.4 1.4 1.1 2.4 1.7 1.2 1.6 1.5 2.3 2011 3.2 3.6 3.6 1.1 1.5 1.5 1.1 2.5 1.8 1.2 1.7 1.5 2.3 2012 3.2 3.6 3.7 1.1 1.5 1.5 1.2 2.5 1.8 1.2 1.7 1.5 2.3 2013 3.2 3.6 3.9 1.1 1.5 1.5 1.2 2.6 1.8 1.2 1.7 1.5 2.4 2014 3.1 3.7 4.1 1.1 1.5 1.6 1.2 2.7 1.9 1.2 1.7 1.6 2.4 2015 3.1 3.7 4.2 1.2 1.5 1.6 1.3 2.7 1.9 1.3 1.8 1.6 2.4 2016 3.2 3.7 4.2 1.2 1.6 1.6 1.3 2.8 1.9 1.3 1.8 1.6 2.5 2017 3.5 3.7 4.0 1.2 1.6 1.6 1.3 2.8 2.0 1.3 1.8 1.6 2.5 2018 3.5 3.7 4.1 1.2 1.7 1.6 1.3 2.9 2.0 1.3 1.8 1.6 2.5 2019 3.5 3.7 4.2 1.2 1.7 1.6 1.4 2.9 2.0 1.4 1.9 1.6 2.6 2020 3.5 3.8 4.2 1.2 1.8 1.7 1.4 3.0 2.0 1.4 1.9 1.6 2.6 2021 3.5 3.7 4.2 1.2 1.8 1.7 1.4 3.0 2.1 1.4 1.9 1.6 2.6 2022 3.4 3.7 4.2 1.2 1.8 1.6 1.4 3.0 2.0 1.4 1.9 1.6 2.6 2023 3.4 3.7 4.1 1.2 1.8 1.6 1.4 3.0 2.0 1.4 1.8 1.6 2.5 2024 3.4 3.7 4.0 1.2 1.8 1.6 1.4 3.1 2.0 1.4 1.8 1.6 2.5 2025 3.3 3.7 3.9 1.2 1.8 1.6 1.4 3.1 2.0 1.4 1.8 1.6 2.5 2026 3.3 3.7 3.8 1.2 1.8 1.7 1.4 3.1 2.0 1.4 1.8 1.5 2.5 2027 3.3 3.7 3.7 1.2 1.8 1.7 1.4 3.1 2.0 1.3 1.7 1.5 2.5 2028 3.3 3.6 3.6 1.2 1.8 1.7 1.4 3.1 2.0 1.3 1.7 1.5 2.5 2029 3.2 3.6 3.6 1.2 1.8 1.7 1.4 3.1 2.0 1.3 1.7 1.5 2.4 2030 3.2 3.5 3.5 1.2 1.8 1.7 1.4 3.2 1.9 1.3 1.7 1.5 2.4

Table A12: Value-added in Aviation (£billion, 1995 prices)

S.East G.London Eastern S.West W.Mid. E.Mid Yks&Hu. Nw&My N.East Wales Scot. N.I. UK

1998 1.8 3.8 0.9 0.2 0.3 0.2 0.1 0.9 0.2 0.2 0.6 0.2 9.4 1999 1.8 3.8 1.0 0.2 0.3 0.2 0.1 1.0 0.2 0.2 0.7 0.2 9.8 2000 1.9 4.0 1.1 0.2 0.3 0.3 0.1 1.0 0.2 0.2 0.7 0.2 10.2 2001 2.0 4.1 1.1 0.2 0.3 0.3 0.1 1.1 0.3 0.2 0.7 0.2 10.6 2002 2.1 4.2 1.2 0.2 0.4 0.3 0.1 1.2 0.3 0.2 0.8 0.2 11.1 2003 2.1 4.3 1.4 0.2 0.4 0.3 0.2 1.3 0.3 0.2 0.8 0.2 11.6 2004 2.1 4.4 1.5 0.2 0.4 0.3 0.2 1.3 0.3 0.2 0.8 0.2 12.0 2005 2.1 4.6 1.6 0.2 0.4 0.3 0.2 1.4 0.3 0.2 0.9 0.3 12.6 2006 2.1 4.7 1.9 0.3 0.4 0.3 0.2 1.5 0.3 0.2 0.9 0.3 13.1 2007 2.2 4.8 2.0 0.3 0.5 0.4 0.2 1.6 0.3 0.2 0.9 0.3 13.6 2008 2.3 4.8 2.2 0.3 0.5 0.4 0.2 1.6 0.3 0.3 0.9 0.3 14.2 2009 2.5 4.9 2.4 0.3 0.6 0.4 0.2 1.7 0.3 0.3 1.0 0.3 14.8 2010 2.6 5.1 2.5 0.3 0.6 0.5 0.2 1.7 0.4 0.3 1.0 0.3 15.5 2011 2.7 5.3 2.6 0.3 0.7 0.5 0.2 1.8 0.4 0.3 1.1 0.3 16.1 2012 2.8 5.4 2.8 0.4 0.7 0.5 0.2 1.9 0.4 0.3 1.1 0.3 16.8 2013 2.8 5.6 3.1 0.4 0.7 0.6 0.3 2.0 0.4 0.3 1.2 0.3 17.5 2014 2.8 5.8 3.3 0.4 0.7 0.6 0.3 2.1 0.4 0.3 1.2 0.3 18.3 2015 2.8 6.0 3.6 0.4 0.7 0.7 0.3 2.2 0.5 0.3 1.3 0.3 19.1 2016 3.2 6.0 3.7 0.4 0.8 0.7 0.3 2.3 0.5 0.3 1.3 0.3 19.9 2017 3.9 6.0 3.7 0.4 0.8 0.7 0.3 2.4 0.5 0.3 1.4 0.4 20.8 2018 4.1 6.2 3.8 0.4 0.9 0.7 0.3 2.5 0.5 0.4 1.4 0.4 21.7 2019 4.2 6.5 4.0 0.5 0.9 0.7 0.4 2.6 0.5 0.4 1.5 0.4 22.5 2020 4.3 6.6 4.3 0.5 1.0 0.7 0.4 2.7 0.5 0.4 1.5 0.4 23.4 2021 4.3 6.8 4.4 0.5 1.1 0.8 0.4 2.8 0.6 0.4 1.6 0.4 23.9 2022 4.3 7.0 4.5 0.5 1.1 0.8 0.4 2.9 0.6 0.4 1.6 0.4 24.5 2023 4.4 7.2 4.5 0.6 1.2 0.8 0.5 3.0 0.6 0.4 1.6 0.4 25.1 2024 4.5 7.4 4.5 0.6 1.2 0.8 0.5 3.0 0.6 0.4 1.6 0.4 25.6 2025 4.5 7.7 4.5 0.7 1.3 0.9 0.5 3.1 0.6 0.4 1.6 0.4 26.2 2026 4.7 7.8 4.5 0.7 1.3 0.9 0.5 3.2 0.6 0.5 1.6 0.4 26.8 2027 5.0 7.8 4.5 0.7 1.3 0.9 0.5 3.3 0.7 0.5 1.7 0.5 27.3 2028 5.0 7.9 4.6 0.7 1.4 1.0 0.5 3.4 0.7 0.5 1.7 0.5 27.9 2029 5.1 8.0 4.6 0.8 1.4 1.1 0.5 3.5 0.7 0.5 1.7 0.5 28.4 2030 5.2 8.1 4.6 0.9 1.4 1.1 0.5 3.6 0.7 0.5 1.7 0.5 28.9

Table A13: Aviation's Contribution to GDP (%)

S.East G.London Eastern S.West W.Mid. E.Mid Yks&Hu. Nw&My N.East Wales Scot. N.I. UK

1998 1.8 3.3 1.6 0.3 0.5 0.5 0.2 1.4 1.0 0.7 1.2 1.4 1.4 1999 1.8 3.2 1.7 0.3 0.6 0.5 0.2 1.5 1.1 0.7 1.3 1.4 1.5 2000 1.9 3.3 1.7 0.3 0.6 0.6 0.2 1.5 1.1 0.7 1.3 1.4 1.5 2001 1.9 3.2 1.8 0.3 0.6 0.6 0.3 1.5 1.1 0.8 1.3 1.4 1.5 2002 1.9 3.2 1.9 0.3 0.6 0.6 0.3 1.6 1.1 0.8 1.3 1.4 1.5 2003 1.8 3.2 2.0 0.3 0.7 0.6 0.3 1.6 1.2 0.8 1.4 1.4 1.6 2004 1.8 3.3 2.1 0.4 0.7 0.6 0.3 1.7 1.2 0.8 1.4 1.4 1.6 2005 1.8 3.3 2.2 0.4 0.7 0.6 0.3 1.8 1.3 0.8 1.4 1.4 1.6 2006 1.7 3.3 2.5 0.4 0.7 0.6 0.3 1.9 1.3 0.8 1.4 1.4 1.7 2007 1.7 3.3 2.7 0.4 0.8 0.7 0.3 1.9 1.3 0.9 1.5 1.4 1.7 2008 1.8 3.3 2.8 0.4 0.9 0.7 0.3 1.9 1.3 0.9 1.5 1.4 1.7 2009 1.9 3.3 2.9 0.4 0.9 0.7 0.3 2.0 1.3 0.9 1.5 1.4 1.7 2010 1.9 3.3 3.0 0.4 0.9 0.8 0.3 2.0 1.3 0.9 1.5 1.4 1.8 2011 1.9 3.4 3.1 0.4 1.0 0.8 0.3 2.0 1.4 0.9 1.5 1.4 1.8 2012 1.9 3.4 3.2 0.5 1.0 0.9 0.4 2.1 1.4 0.9 1.6 1.4 1.8 2013 1.8 3.4 3.4 0.5 1.0 0.9 0.4 2.2 1.5 0.9 1.6 1.4 1.9 2014 1.8 3.5 3.6 0.5 1.0 0.9 0.4 2.3 1.5 0.9 1.6 1.4 1.9 2015 1.7 3.5 3.8 0.5 1.0 1.0 0.4 2.3 1.5 1.0 1.7 1.4 1.9 2016 1.9 3.5 3.8 0.5 1.0 1.0 0.4 2.4 1.5 1.0 1.7 1.5 2.0 2017 2.3 3.4 3.6 0.5 1.1 1.0 0.4 2.4 1.6 1.0 1.7 1.5 2.0 2018 2.3 3.5 3.7 0.5 1.1 1.0 0.4 2.5 1.6 1.0 1.8 1.5 2.0 2019 2.3 3.5 3.8 0.5 1.2 1.0 0.5 2.5 1.6 1.0 1.8 1.5 2.1 2020 2.3 3.5 3.8 0.5 1.2 1.0 0.5 2.6 1.6 1.1 1.8 1.5 2.1 2021 2.2 3.5 3.8 0.5 1.3 1.0 0.5 2.6 1.7 1.1 1.8 1.5 2.1 2022 2.2 3.5 3.8 0.5 1.3 1.0 0.5 2.6 1.7 1.1 1.8 1.4 2.1 2023 2.1 3.6 3.7 0.5 1.3 1.0 0.5 2.6 1.7 1.1 1.7 1.4 2.1 2024 2.1 3.6 3.6 0.6 1.4 1.0 0.5 2.6 1.6 1.1 1.7 1.4 2.1 2025 2.0 3.6 3.5 0.6 1.4 1.0 0.5 2.6 1.6 1.1 1.7 1.4 2.1 2026 2.1 3.6 3.4 0.6 1.4 1.0 0.5 2.6 1.6 1.1 1.7 1.4 2.0 2027 2.1 3.5 3.3 0.6 1.4 1.0 0.5 2.7 1.6 1.1 1.7 1.4 2.0 2028 2.1 3.5 3.2 0.6 1.4 1.1 0.5 2.7 1.6 1.1 1.6 1.3 2.0 2029 2.0 3.4 3.1 0.6 1.4 1.1 0.5 2.7 1.6 1.1 1.6 1.3 2.0 2030 2.0 3.4 3.1 0.6 1.4 1.1 0.5 2.7 1.6 1.1 1.6 1.3 2.0

Table A14: Importance of Different Sectors to Each Region in 1998 (UK=100)

S. East Gr London Eastern S. West W. Midlnd E. Midlnd Yks&Humb N. West Mersey N. East Wales Scotland N. Ireland

AGRICULTURE 105 5 144 173 96 125 87 80 18 64 183 122 221 EXTRACTION 48 44 61 98 43 132 125 54 16 103 157 370 104 MANUFACTURING 79 45 100 96 146 145 120 120 84 117 124 90 103 $FOOD DRINK & TOBACCO 47 35 114 107 95 158 154 120 131 102 104 134 159 $TEXTILES 17 40 35 50 70 334 163 177 62 96 81 119 265 $WOOD PRODUCT INDUSTRIES 67 40 107 108 109 130 135 101 66 133 129 140 142 $PULP PAPER & PRINTING 102 136 120 94 67 103 106 113 68 66 89 75 55 $COKE OIL REFIN & NUCL. FUEL 91 28 68 34 17 33 98 557 49 13 116 62 3 $CHEMICAL INDUSTRIES 89 52 95 58 63 145 127 199 134 200 103 72 63 $RUBBER & PLASTIC INDUSTRIES 78 29 114 105 181 129 96 135 62 124 141 69 116 $OTHER NON-METAL MIN. PRODUCTS 52 21 68 78 300 166 120 81 199 100 108 68 129 $METALS 60 27 73 76 259 130 157 91 80 139 162 77 37 $MACHINERY & EQUIPMENT 91 20 131 103 173 152 127 98 85 147 81 74 71 $ELECTRIC & OPTICAL EQUIPMENT 139 40 132 125 110 87 61 79 80 105 174 119 84 $TRANSPORT EQUIPMENT 77 25 82 140 229 121 72 131 33 126 136 68 123 $OTHER MANUFACTURING 85 50 99 89 128 157 156 123 66 105 166 48 68 ELECTRICITY WATER & GAS SVS. 108 42 89 140 116 101 109 118 62 92 84 132 112 CONSTRUCTION 91 81 97 99 100 96 106 102 84 138 96 136 99 DISTRIBUTION 110 92 110 102 100 100 99 102 104 91 91 94 92 HOTELS 96 110 91 121 84 86 101 102 90 97 105 106 96 TRANSPORT & COMMUNICATIONS 101 144 112 83 85 84 97 97 98 87 73 91 65 FINANCIAL SERVICES 96 195 100 94 68 53 99 75 99 56 60 99 54 BUSINESS SERVICES 124 156 106 86 85 85 78 91 86 79 59 78 46 PUBLIC ADMIN. 94 106 78 115 86 78 82 93 138 123 127 111 175 EDUCATION 110 78 100 106 105 102 104 96 120 102 97 97 133 HEALTH 92 81 88 105 88 94 104 102 127 116 132 124 145 OTHER PERSONAL SERVICES 96 135 94 89 82 88 97 84 109 100 113 103 95 Values are 'location quotients', defined as the share of the region's employment accounted for by the relevant sector, compared with the same share for the UK as a whole. Bold sectors indicate those shown in ECS Part I to make relatively heavy use of air transport. Bold numbers represent relatively important sectors within a region compared with their importance in the UK as a whole.

50 Annex B: An example of the impact of different passenger numbers

10% fewer passengers

Although we have not analysed any specific scenarios of the impact of alternative assumptions about constraints on development, we have looked at the impact of an arbitrarily different set of passenger numbers in order to test the model we have built. The assumption we have chosen is a 1% a year lower growth rate in all passenger numbers from 2000 onwards until they are 10% below the level in the base case, with passenger numbers thereafter remaining 10% below those projected in the base case. The assumption is applied to all passenger numbers, ie all passenger types in each region, and also to the figures for passenger numbers by region of origin/destination.

Tables B1-B2 show the implications for projections of aviation-related employment. These show that estimates of direct, indirect and induced employment are broadly linear – that is, that 10% fewer passengers means broadly 10% less employment. But clearly, given the earlier discussion of crowding out, we would not expect this to translate into the same loss of jobs across the economy as a whole.

We know from the Part 1 study that when we look at the UK as a whole, most of any change in employment in aviation is offset by changes in employment in other industries. However, there is no reason why that is necessarily the case at the level of individual regions, given the scope for inter-regional migration in response to differing job opportunities.

Overall changes in employment are shown in tables B3-B4. Typically, regions where aviation-related employment is a relatively high share of total employment are likely to suffer more from reductions in air travel compared to the base case.

Tables B5-B6 illustrate the impact on productivity and GDP – productivity is affected in all regions as fewer business trips translate into lower total factor productivity. The overall impact varies across regions, however, as different industries are affected to different degrees (see the Part 1 study), and different regions have different concentrations of industry. At a regional level, the impact varies from a reduction in average productivity of 0.2% to a reduction of 0.4%, accounting for the bulk of the impact on output. Table B1: Impact of 10% Fewer Passengers - % change in Aviation-related Employment

S.East G.London Eastern S.West W.Mid. E.Mid Yks&Hu. Nw&My N.East Wales Scot. N.I. UK

1998 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1999 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2000 -0.8 -0.8 -0.8 -0.8 -0.8 -0.8 -0.9 -0.8 -0.8 -0.8 -0.8 -0.8 -0.8 2001 -1.7 -1.6 -1.6 -1.7 -1.7 -1.7 -1.7 -1.6 -1.5 -1.6 -1.5 -1.6 -1.6 2002 -2.5 -2.4 -2.4 -2.5 -2.5 -2.5 -2.6 -2.4 -2.3 -2.5 -2.3 -2.4 -2.4 2003 -3.3 -3.2 -3.2 -3.4 -3.4 -3.4 -3.4 -3.3 -3.1 -3.3 -3.1 -3.2 -3.3 2004 -4.2 -4.0 -4.0 -4.3 -4.2 -4.2 -4.3 -4.1 -3.9 -4.2 -3.9 -4.1 -4.1 2005 -5.1 -4.8 -4.8 -5.1 -5.1 -5.1 -5.2 -4.9 -4.7 -5.0 -4.7 -4.9 -4.9 2006 -5.9 -5.6 -5.6 -6.0 -5.9 -5.9 -6.1 -5.8 -5.6 -5.8 -5.5 -5.7 -5.8 2007 -6.8 -6.4 -6.4 -6.8 -6.8 -6.8 -6.9 -6.6 -6.4 -6.7 -6.4 -6.6 -6.6 2008 -7.6 -7.3 -7.3 -7.7 -7.6 -7.7 -7.8 -7.4 -7.2 -7.5 -7.2 -7.4 -7.4 2009 -8.5 -8.1 -8.1 -8.6 -8.5 -8.5 -8.7 -8.3 -8.1 -8.4 -8.0 -8.2 -8.3 2010 -8.5 -8.1 -8.1 -8.6 -8.5 -8.5 -8.7 -8.3 -8.1 -8.4 -8.0 -8.3 -8.3 2011 -8.5 -8.1 -8.2 -8.6 -8.5 -8.5 -8.7 -8.3 -8.1 -8.4 -8.1 -8.3 -8.3 2012 -8.5 -8.1 -8.2 -8.6 -8.5 -8.5 -8.7 -8.3 -8.1 -8.4 -8.1 -8.3 -8.3 2013 -8.5 -8.2 -8.2 -8.6 -8.5 -8.6 -8.7 -8.3 -8.2 -8.5 -8.1 -8.3 -8.3 2014 -8.5 -8.2 -8.2 -8.6 -8.5 -8.6 -8.7 -8.4 -8.2 -8.5 -8.1 -8.3 -8.4 2015 -8.5 -8.2 -8.2 -8.6 -8.5 -8.6 -8.7 -8.4 -8.2 -8.5 -8.1 -8.3 -8.4 2016 -8.5 -8.2 -8.2 -8.6 -8.5 -8.6 -8.8 -8.4 -8.2 -8.5 -8.2 -8.3 -8.4 2017 -8.5 -8.2 -8.2 -8.6 -8.5 -8.6 -8.8 -8.4 -8.2 -8.5 -8.2 -8.3 -8.4 2018 -8.5 -8.2 -8.3 -8.6 -8.5 -8.6 -8.7 -8.4 -8.3 -8.5 -8.2 -8.3 -8.4 2019 -8.5 -8.2 -8.3 -8.6 -8.5 -8.6 -8.7 -8.4 -8.3 -8.5 -8.2 -8.4 -8.4 2020 -8.5 -8.2 -8.3 -8.6 -8.5 -8.6 -8.7 -8.4 -8.3 -8.5 -8.2 -8.4 -8.4 2021 -8.5 -8.2 -8.3 -8.6 -8.5 -8.6 -8.7 -8.4 -8.3 -8.5 -8.2 -8.4 -8.4 2022 -8.5 -8.2 -8.3 -8.6 -8.5 -8.6 -8.7 -8.4 -8.3 -8.5 -8.2 -8.4 -8.4 2023 -8.5 -8.3 -8.3 -8.6 -8.5 -8.6 -8.7 -8.4 -8.3 -8.5 -8.2 -8.4 -8.4 2024 -8.5 -8.3 -8.3 -8.6 -8.5 -8.6 -8.7 -8.4 -8.3 -8.5 -8.2 -8.4 -8.4 2025 -8.5 -8.3 -8.3 -8.6 -8.5 -8.6 -8.7 -8.4 -8.3 -8.5 -8.2 -8.4 -8.4 2026 -8.5 -8.3 -8.3 -8.6 -8.5 -8.6 -8.7 -8.4 -8.3 -8.5 -8.3 -8.4 -8.4 2027 -8.5 -8.3 -8.3 -8.6 -8.5 -8.6 -8.7 -8.4 -8.4 -8.5 -8.3 -8.4 -8.4 2028 -8.6 -8.3 -8.3 -8.6 -8.5 -8.6 -8.8 -8.4 -8.4 -8.5 -8.3 -8.4 -8.4 2029 -8.6 -8.3 -8.3 -8.6 -8.5 -8.6 -8.8 -8.5 -8.4 -8.5 -8.3 -8.4 -8.4 2030 -8.6 -8.3 -8.3 -8.6 -8.6 -8.6 -8.8 -8.5 -8.4 -8.6 -8.3 -8.4 -8.5

Table B2: Impact of 10% Fewer Passengers - Change in Aviation-related Employment ('000s)

S.East G.London Eastern S.West W.Mid. E.Mid Yks&Hu. Nw&My N.East Wales Scot. N.I. UK

1998 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1999 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2000 -0.9 -1.0 -0.4 -0.2 -0.2 -0.2 -0.2 -0.4 -0.1 -0.1 -0.2 -0.1 -3.9 2001 -1.9 -2.0 -0.8 -0.3 -0.4 -0.3 -0.3 -0.8 -0.2 -0.2 -0.5 -0.1 -7.9 2002 -2.9 -3.0 -1.3 -0.5 -0.6 -0.5 -0.5 -1.3 -0.3 -0.3 -0.7 -0.2 -12.0 2003 -3.8 -4.1 -1.8 -0.7 -0.9 -0.7 -0.6 -1.7 -0.4 -0.4 -0.9 -0.3 -16.3 2004 -4.8 -5.1 -2.4 -0.9 -1.1 -0.9 -0.8 -2.2 -0.6 -0.5 -1.2 -0.4 -20.8 2005 -5.7 -6.2 -3.0 -1.1 -1.4 -1.0 -1.0 -2.8 -0.7 -0.6 -1.5 -0.5 -25.4 2006 -6.6 -7.3 -3.9 -1.3 -1.6 -1.2 -1.2 -3.3 -0.8 -0.7 -1.7 -0.5 -30.2 2007 -7.5 -8.4 -4.8 -1.5 -1.9 -1.5 -1.4 -3.8 -0.9 -0.8 -2.0 -0.6 -35.2 2008 -8.7 -9.5 -5.6 -1.8 -2.3 -1.7 -1.6 -4.3 -1.1 -0.9 -2.3 -0.7 -40.4 2009 -10.0 -10.6 -6.5 -2.0 -2.6 -1.9 -1.8 -4.8 -1.2 -1.0 -2.6 -0.8 -45.8 2010 -10.2 -10.8 -6.7 -2.0 -2.6 -2.0 -1.8 -4.8 -1.2 -1.0 -2.6 -0.8 -46.6 2011 -10.4 -10.9 -6.9 -2.1 -2.7 -2.1 -1.9 -4.8 -1.2 -1.0 -2.7 -0.8 -47.5 2012 -10.5 -11.0 -7.2 -2.2 -2.8 -2.1 -1.9 -4.9 -1.3 -1.1 -2.7 -0.8 -48.5 2013 -10.4 -11.2 -7.7 -2.2 -2.8 -2.2 -2.0 -5.0 -1.3 -1.1 -2.8 -0.8 -49.5 2014 -10.4 -11.4 -8.1 -2.3 -2.9 -2.2 -2.0 -5.1 -1.3 -1.1 -2.9 -0.8 -50.5 2015 -10.4 -11.6 -8.6 -2.4 -2.9 -2.3 -2.1 -5.3 -1.4 -1.1 -2.9 -0.9 -51.6 2016 -11.1 -11.6 -8.6 -2.4 -3.0 -2.3 -2.1 -5.3 -1.4 -1.1 -3.0 -0.9 -52.8 2017 -12.2 -11.6 -8.4 -2.4 -3.1 -2.4 -2.2 -5.4 -1.4 -1.2 -3.0 -0.9 -54.0 2018 -12.4 -11.8 -8.6 -2.4 -3.2 -2.4 -2.2 -5.5 -1.4 -1.2 -3.1 -0.9 -55.1 2019 -12.6 -12.0 -8.9 -2.5 -3.3 -2.5 -2.3 -5.6 -1.5 -1.2 -3.2 -0.9 -56.3 2020 -12.7 -12.2 -9.1 -2.6 -3.4 -2.5 -2.3 -5.7 -1.5 -1.2 -3.2 -0.9 -57.3 2021 -12.6 -12.2 -9.2 -2.6 -3.5 -2.5 -2.4 -5.7 -1.5 -1.2 -3.2 -0.9 -57.5 2022 -12.5 -12.3 -9.3 -2.7 -3.5 -2.5 -2.4 -5.7 -1.5 -1.2 -3.2 -0.9 -57.8 2023 -12.6 -12.4 -9.1 -2.7 -3.6 -2.6 -2.4 -5.7 -1.5 -1.2 -3.2 -0.9 -58.0 2024 -12.6 -12.5 -9.1 -2.8 -3.6 -2.6 -2.4 -5.7 -1.5 -1.2 -3.2 -0.9 -58.2 2025 -12.6 -12.6 -9.0 -2.8 -3.7 -2.6 -2.5 -5.8 -1.6 -1.3 -3.2 -0.9 -58.4 2026 -12.7 -12.5 -8.8 -2.8 -3.7 -2.7 -2.5 -5.8 -1.6 -1.3 -3.2 -0.9 -58.4 2027 -12.9 -12.4 -8.7 -2.9 -3.7 -2.7 -2.5 -5.8 -1.6 -1.3 -3.2 -0.9 -58.5 2028 -12.9 -12.4 -8.6 -2.9 -3.7 -2.7 -2.5 -5.8 -1.6 -1.3 -3.1 -0.9 -58.5 2029 -12.8 -12.3 -8.5 -2.9 -3.7 -2.8 -2.5 -5.8 -1.6 -1.3 -3.1 -0.9 -58.4 2030 -12.7 -12.2 -8.4 -3.0 -3.7 -2.9 -2.5 -5.9 -1.6 -1.3 -3.1 -0.9 -58.3

52 Table B3: Impact of 10% Fewer Passengers - % change in Total Employment

S.East G.London Eastern S.West W.Mid. E.Mid Yks&Hu. Nw&My N.East Wales Scot. N.I. UK

1998 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1999 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2000 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2001 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2002 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2003 -0.1 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2004 -0.1 -0.1 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2005 -0.1 -0.1 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2006 -0.2 -0.1 -0.1 0.0 0.0 0.0 0.0 -0.1 0.0 0.0 0.0 0.0 -0.1 2007 -0.2 -0.2 -0.2 0.0 0.0 0.0 0.0 -0.1 0.0 0.0 0.0 0.0 -0.1 2008 -0.2 -0.2 -0.2 0.0 0.0 0.0 0.0 -0.1 -0.1 0.0 0.0 0.0 -0.1 2009 -0.3 -0.2 -0.2 0.0 0.0 0.0 0.0 -0.1 -0.1 0.0 0.0 0.0 -0.1 2010 -0.3 -0.3 -0.3 0.0 -0.1 0.0 0.0 -0.1 -0.1 0.0 0.0 0.0 -0.1 2011 -0.3 -0.3 -0.3 -0.1 -0.1 -0.1 0.0 -0.1 -0.1 0.0 0.0 0.0 -0.2 2012 -0.3 -0.3 -0.3 -0.1 -0.1 -0.1 0.0 -0.2 -0.1 0.0 0.0 -0.1 -0.2 2013 -0.3 -0.3 -0.4 -0.1 -0.1 -0.1 0.0 -0.2 -0.1 0.0 0.0 0.0 -0.2 2014 -0.4 -0.3 -0.4 -0.1 -0.1 -0.1 0.0 -0.2 -0.1 0.0 0.0 0.0 -0.2 2015 -0.4 -0.3 -0.4 -0.1 -0.1 -0.1 0.0 -0.2 -0.1 0.0 0.0 0.0 -0.2 2016 -0.4 -0.3 -0.5 -0.1 -0.1 -0.1 0.0 -0.2 -0.1 0.0 0.0 0.0 -0.2 2017 -0.4 -0.3 -0.4 0.0 -0.1 0.0 0.0 -0.2 -0.1 0.0 0.1 0.0 -0.2 2018 -0.4 -0.3 -0.4 0.0 0.0 0.0 0.0 -0.1 -0.1 0.0 0.1 0.0 -0.2 2019 -0.3 -0.3 -0.4 0.0 0.0 0.0 0.0 -0.1 0.0 0.0 0.1 0.0 -0.1 2020 -0.3 -0.3 -0.4 0.0 0.0 0.0 0.0 -0.1 0.0 0.0 0.2 0.0 -0.1 2021 -0.3 -0.2 -0.4 0.0 0.0 0.0 0.0 -0.1 0.0 0.1 0.2 0.1 -0.1 2022 -0.3 -0.2 -0.4 0.0 0.0 0.0 0.1 -0.1 0.0 0.1 0.2 0.1 -0.1 2023 -0.3 -0.2 -0.4 0.0 0.0 0.0 0.1 -0.1 0.0 0.1 0.2 0.1 -0.1 2024 -0.3 -0.2 -0.4 0.1 0.0 0.1 0.1 0.0 0.0 0.1 0.3 0.1 -0.1 2025 -0.3 -0.2 -0.4 0.1 0.0 0.1 0.1 -0.1 0.0 0.1 0.2 0.1 -0.1 2026 -0.2 -0.2 -0.4 0.1 0.0 0.1 0.1 0.0 0.0 0.1 0.3 0.1 0.0 2027 -0.2 -0.2 -0.4 0.1 0.0 0.1 0.1 0.0 0.0 0.1 0.3 0.1 -0.1 2028 -0.2 -0.2 -0.3 0.1 0.0 0.1 0.1 0.0 0.1 0.1 0.3 0.1 0.0 2029 -0.2 -0.2 -0.3 0.1 0.1 0.1 0.1 0.0 0.1 0.1 0.3 0.1 0.0 2030 -0.2 -0.2 -0.3 0.1 0.1 0.1 0.1 0.0 0.1 0.1 0.3 0.1 0.0

Table B4: Impact of 10% Fewer Passengers - Change in Total Employment ('000s)

S.East G.London Eastern S.West W.Mid. E.Mid Yks&Hu. Nw&My N.East Wales Scot. N.I. UK

1998 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1999 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2000 -0.5 -0.4 -0.1 0.1 0.1 0.1 0.2 0.0 0.0 0.1 0.1 0.0 -0.3 2001 -1.1 -1.0 -0.2 0.2 0.2 0.1 0.3 -0.1 0.0 0.1 0.2 0.0 -1.3 2002 -1.9 -1.7 -0.5 0.2 0.2 0.2 0.3 -0.3 0.0 0.1 0.2 0.0 -3.3 2003 -2.9 -2.6 -1.0 0.2 0.2 0.1 0.4 -0.6 0.0 0.1 0.2 0.0 -6.0 2004 -4.0 -3.6 -1.4 0.1 0.1 0.1 0.4 -0.9 -0.1 0.0 0.2 0.0 -9.3 2005 -5.3 -4.8 -2.2 -0.1 -0.1 0.0 0.3 -1.4 -0.2 0.0 0.2 -0.1 -13.8 2006 -6.7 -6.1 -3.2 -0.3 -0.3 -0.2 0.2 -2.0 -0.3 -0.1 0.1 -0.1 -19.1 2007 -8.2 -7.5 -4.3 -0.6 -0.6 -0.4 0.0 -2.6 -0.4 -0.2 0.0 -0.2 -25.0 2008 -9.8 -8.8 -5.4 -0.8 -0.9 -0.6 -0.1 -3.1 -0.5 -0.2 0.0 -0.2 -30.7 2009 -11.4 -10.0 -6.4 -0.9 -1.0 -0.7 -0.1 -3.5 -0.6 -0.3 0.1 -0.2 -35.0 2010 -12.7 -10.9 -7.3 -1.2 -1.3 -0.9 -0.4 -3.9 -0.7 -0.3 0.1 -0.3 -39.9 2011 -14.0 -11.9 -7.9 -1.6 -1.7 -1.2 -0.7 -4.4 -0.9 -0.5 0.1 -0.4 -45.2 2012 -15.0 -12.6 -8.5 -1.8 -1.9 -1.4 -0.8 -4.7 -1.0 -0.5 0.2 -0.4 -48.6 2013 -15.3 -13.0 -10.4 -1.9 -2.0 -1.4 -0.9 -4.9 -1.0 -0.5 0.4 -0.4 -51.5 2014 -15.8 -13.5 -11.2 -2.0 -2.0 -1.6 -1.0 -5.2 -1.0 -0.5 0.6 -0.4 -53.8 2015 -15.9 -13.9 -12.6 -2.0 -2.0 -1.6 -1.1 -5.3 -1.0 -0.5 0.9 -0.3 -55.5 2016 -16.6 -14.1 -13.0 -2.0 -2.1 -1.6 -1.1 -5.4 -1.0 -0.4 1.2 -0.3 -56.6 2017 -16.8 -13.2 -12.7 -1.3 -1.5 -1.1 -0.5 -4.7 -0.8 -0.1 2.0 -0.1 -51.0 2018 -16.6 -12.6 -12.6 -0.7 -1.1 -0.6 0.0 -4.2 -0.6 0.1 2.8 0.1 -46.3 2019 -16.3 -12.1 -12.6 -0.2 -0.7 -0.2 0.4 -3.7 -0.4 0.4 3.5 0.2 -42.2 2020 -15.8 -11.6 -12.7 0.3 -0.4 0.1 0.8 -3.3 -0.3 0.6 4.1 0.4 -38.1 2021 -15.4 -11.2 -12.7 0.6 -0.2 0.4 1.1 -3.0 -0.2 0.8 4.7 0.5 -34.8 2022 -14.9 -10.8 -12.7 0.9 0.1 0.7 1.3 -2.5 0.0 0.9 5.2 0.6 -31.5 2023 -14.4 -10.6 -12.5 1.1 0.2 0.9 1.6 -2.2 0.1 1.0 5.7 0.7 -28.5 2024 -13.1 -9.6 -12.0 1.8 0.8 1.5 2.2 -1.4 0.3 1.3 6.5 0.9 -21.0 2025 -13.2 -10.1 -12.3 1.5 0.6 1.3 2.1 -1.7 0.2 1.3 6.4 0.9 -23.2 2026 -12.2 -9.2 -11.6 2.1 1.1 1.8 2.6 -1.0 0.5 1.5 7.1 1.0 -16.2 2027 -12.7 -9.6 -11.8 1.9 0.9 1.6 2.4 -1.2 0.4 1.4 7.0 1.0 -18.9 2028 -11.6 -8.7 -11.1 2.4 1.3 2.0 2.9 -0.6 0.6 1.7 7.6 1.2 -12.5 2029 -11.3 -8.5 -10.9 2.5 1.4 2.0 3.1 -0.4 0.6 1.7 7.8 1.2 -10.9 2030 -11.0 -8.3 -10.6 2.5 1.5 2.0 3.2 -0.2 0.7 1.8 8.0 1.2 -9.2

Table B5: Impact of 10% Fewer Passengers - % change in Productivity

S.East G.London Eastern S.West W.Mid. E.Mid Yks&Hu. Nw&My N.East Wales Scot. N.I. UK

1998 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1999 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2000 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2001 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 0.0 -0.1 -0.1 -0.1 -0.1 0.0 2002 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 2003 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 2004 -0.1 -0.2 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 2005 -0.1 -0.2 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.2 -0.2 -0.1 2006 -0.2 -0.2 -0.2 -0.2 -0.1 -0.2 -0.1 -0.2 -0.1 -0.1 -0.2 -0.2 -0.2 2007 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 2008 -0.2 -0.3 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.3 -0.2 -0.2 2009 -0.2 -0.3 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.3 -0.3 -0.2 2010 -0.2 -0.3 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.3 -0.3 -0.2 2011 -0.2 -0.3 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.3 -0.2 -0.2 2012 -0.2 -0.3 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.3 -0.2 -0.2 2013 -0.2 -0.3 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.3 -0.2 -0.2 2014 -0.2 -0.3 -0.2 -0.2 -0.1 -0.2 -0.2 -0.2 -0.2 -0.2 -0.3 -0.2 -0.2 2015 -0.2 -0.3 -0.2 -0.2 -0.1 -0.2 -0.2 -0.2 -0.2 -0.2 -0.3 -0.3 -0.2 2016 -0.2 -0.3 -0.2 -0.2 -0.1 -0.2 -0.2 -0.2 -0.2 -0.2 -0.3 -0.3 -0.2 2017 -0.2 -0.3 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.4 -0.3 -0.2 2018 -0.2 -0.3 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.4 -0.3 -0.3 2019 -0.3 -0.3 -0.3 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.4 -0.3 -0.3 2020 -0.3 -0.3 -0.3 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.4 -0.3 -0.3 2021 -0.3 -0.4 -0.3 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.4 -0.3 -0.3 2022 -0.3 -0.4 -0.3 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.4 -0.3 -0.3 2023 -0.3 -0.4 -0.3 -0.3 -0.2 -0.2 -0.2 -0.3 -0.2 -0.2 -0.4 -0.3 -0.3 2024 -0.3 -0.4 -0.3 -0.3 -0.2 -0.3 -0.2 -0.3 -0.3 -0.3 -0.5 -0.3 -0.3 2025 -0.3 -0.4 -0.3 -0.3 -0.2 -0.2 -0.2 -0.3 -0.2 -0.3 -0.4 -0.3 -0.3 2026 -0.3 -0.4 -0.3 -0.3 -0.2 -0.3 -0.2 -0.3 -0.3 -0.3 -0.5 -0.3 -0.3 2027 -0.3 -0.4 -0.3 -0.3 -0.2 -0.3 -0.2 -0.3 -0.2 -0.3 -0.4 -0.3 -0.3 2028 -0.3 -0.4 -0.3 -0.3 -0.2 -0.3 -0.2 -0.3 -0.3 -0.3 -0.4 -0.3 -0.3 2029 -0.3 -0.4 -0.3 -0.3 -0.2 -0.3 -0.2 -0.3 -0.3 -0.3 -0.4 -0.3 -0.3 2030 -0.3 -0.4 -0.3 -0.3 -0.2 -0.3 -0.2 -0.3 -0.3 -0.3 -0.4 -0.3 -0.3

Table B6: Impact of 10% Fewer Passengers - % change in GDP

S.East G.London Eastern S.West W.Mid. E.Mid Yks&Hu. Nw&My N.East Wales Scot. N.I. UK

1998 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1999 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2000 0.0 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2001 -0.1 -0.1 -0.1 -0.1 0.0 -0.1 0.0 -0.1 -0.1 0.0 -0.1 -0.1 -0.1 2002 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 2003 -0.2 -0.2 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 2004 -0.2 -0.2 -0.2 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.2 2005 -0.3 -0.3 -0.2 -0.1 -0.1 -0.1 -0.1 -0.2 -0.1 -0.1 -0.2 -0.2 -0.2 2006 -0.3 -0.4 -0.3 -0.2 -0.2 -0.2 -0.1 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 2007 -0.4 -0.4 -0.4 -0.2 -0.2 -0.2 -0.2 -0.3 -0.2 -0.2 -0.2 -0.2 -0.3 2008 -0.4 -0.5 -0.4 -0.2 -0.2 -0.2 -0.2 -0.3 -0.2 -0.2 -0.3 -0.3 -0.3 2009 -0.5 -0.5 -0.5 -0.3 -0.2 -0.2 -0.2 -0.3 -0.3 -0.2 -0.3 -0.3 -0.4 2010 -0.5 -0.6 -0.5 -0.3 -0.2 -0.3 -0.2 -0.3 -0.3 -0.2 -0.3 -0.3 -0.4 2011 -0.5 -0.6 -0.5 -0.3 -0.2 -0.2 -0.2 -0.4 -0.3 -0.2 -0.3 -0.3 -0.4 2012 -0.5 -0.6 -0.5 -0.3 -0.2 -0.3 -0.2 -0.4 -0.3 -0.2 -0.3 -0.3 -0.4 2013 -0.5 -0.6 -0.6 -0.3 -0.2 -0.3 -0.2 -0.4 -0.3 -0.2 -0.3 -0.3 -0.4 2014 -0.5 -0.6 -0.6 -0.3 -0.2 -0.3 -0.2 -0.4 -0.3 -0.2 -0.3 -0.3 -0.4 2015 -0.5 -0.6 -0.7 -0.3 -0.2 -0.3 -0.2 -0.4 -0.3 -0.2 -0.3 -0.3 -0.4 2016 -0.6 -0.6 -0.7 -0.3 -0.2 -0.3 -0.2 -0.4 -0.3 -0.2 -0.3 -0.3 -0.4 2017 -0.6 -0.6 -0.7 -0.3 -0.2 -0.2 -0.2 -0.4 -0.2 -0.2 -0.3 -0.3 -0.4 2018 -0.6 -0.6 -0.7 -0.2 -0.2 -0.2 -0.2 -0.4 -0.2 -0.2 -0.3 -0.3 -0.4 2019 -0.6 -0.6 -0.7 -0.2 -0.2 -0.2 -0.2 -0.4 -0.2 -0.2 -0.3 -0.3 -0.4 2020 -0.6 -0.6 -0.7 -0.2 -0.2 -0.2 -0.2 -0.3 -0.2 -0.2 -0.2 -0.3 -0.4 2021 -0.6 -0.6 -0.7 -0.2 -0.2 -0.2 -0.1 -0.3 -0.2 -0.2 -0.2 -0.2 -0.4 2022 -0.6 -0.6 -0.7 -0.2 -0.2 -0.2 -0.1 -0.3 -0.2 -0.2 -0.2 -0.2 -0.4 2023 -0.6 -0.6 -0.7 -0.2 -0.2 -0.2 -0.1 -0.3 -0.2 -0.2 -0.2 -0.2 -0.4 2024 -0.6 -0.6 -0.7 -0.2 -0.2 -0.2 -0.1 -0.3 -0.2 -0.2 -0.2 -0.2 -0.4 2025 -0.5 -0.6 -0.7 -0.2 -0.2 -0.2 -0.1 -0.3 -0.2 -0.2 -0.2 -0.2 -0.4 2026 -0.5 -0.6 -0.7 -0.2 -0.2 -0.2 -0.1 -0.3 -0.2 -0.2 -0.2 -0.2 -0.4 2027 -0.5 -0.6 -0.7 -0.2 -0.2 -0.2 -0.1 -0.3 -0.2 -0.2 -0.2 -0.2 -0.4 2028 -0.5 -0.6 -0.6 -0.2 -0.2 -0.2 -0.1 -0.3 -0.2 -0.2 -0.2 -0.2 -0.4 2029 -0.5 -0.6 -0.6 -0.2 -0.2 -0.2 -0.1 -0.3 -0.2 -0.2 -0.1 -0.2 -0.4 2030 -0.5 -0.6 -0.6 -0.2 -0.2 -0.2 -0.1 -0.3 -0.2 -0.2 -0.1 -0.2 -0.4

54 Notes:

1 The Multi-Regional Model, developed in conjunction with the Northern Ireland Economic Research Centre.

2 The Contribution of the Aviation Industry to the UK Economy, Oxford Economic Forecasting, November 1999.

3 The adjustments needed to calculate these figures are an important input to the process of modelling alternative scenarios. But we cannot present the details of individual adjustments without breaching the confidentiality of employment data about individual employers in the various airport employment surveys.

4 An alternative would have been to use the broader data for overall transport and communications in each region to calculate differences in productivity between regions at this level, and then to assume that the same differences in productivity between regions applied to the much narrower sector of air transport services. Neither approach is ideal, but one reason we have preferred the one adopted is because differences between regional productivity in transport and communications will arise partly from different proportions of different activities within the sector rather than from different productivity levels within any activity itself. So a region with a high share of aviation within transport services would tend to show a high relative productivity for transport services as a whole simply because aviation is a high- productivity activity.

5 The figures were adjusted to avoid double counting of jobs in other transport services and distribution which should already be picked up in the estimates we are using for direct employment.

6 The regional shares of total and tradeable employment are shown in the table below. The location quotient is the ratio of tradeable to total employment. A value of 100 indicates that the shares are equal.

Shares of total and tradeable employment. 1998 Location Total (%) Tradeable (%) quotient South East 14.0 14.1 100.7 Greater London 14.8 16.5 111.5 Eastern 8.9 9.0 101.3 South West 8.5 8.4 99.1 West Midlands 8.9 10.0 111.9 East Midlands 6.9 7.6 109.8 Yorks and Humber 8.3 8.1 97.2 North East 3.7 3.1 82.3 North West 10.8 10.1 93.5 Scotland 8.3 7.4 88.2 Wales 4.3 3.8 87.9 N. Ireland 2.6 2.1 80.0

Total 100 100

7 ‘The Political Economy of Full Employment in Modern Britain’, Kalecki Memorial Lecture October 1999, R.E. Rowthorn.

8 All airports in the South West are assumed to have the same spending distribution as Exeter airport.

9 Leeds/Bradford airport is assumed to have the same spending characteristics as Humberside airport.

10 Liverpool airport is assumed to have a spending distribution identical to that at Manchester airport

11 Our industrial model shows that the additional consumer spending associated with a given rise in total employment is estimated to increase employment in distribution by 13.6% of the original increase in overall employment. This is just over half the overall induced multiplier of 25% we estimated for the national study from our UK macroeconomic model. We have also made the simplifying assumption that most jobs in distribution itself will be in the same region as any rise in spending, while other induced jobs will be spread throughout the country. Hence we have allocated an initial 50% of induced effects to the home region, and allocated the rest across all regions in proportion to tradeable employment in each region.

12 See the report on Part 1 of the study.

13 ACI Europe, Creating Employment and Prosperity in Europe. (Study of the social & economic impact of airports), Sept 1998

14 Workload ‘units’ count each tonne of freight as equivalent to 10 passengers.

15 See particularly pages 34-36 of the Part 1 report.

16 Quoted in Newcastle Airport, Submission to ECS Regional Study, August 2000

17 Built and run in conjunction with the Northern Ireland Economic Research Centre.

18 Ie determined within the model by reference to some other variables within the model, rather than just by assumption (known as exogenous variables).

19 Described in Annex F of the 1999 report and the Working Paper “TFP growth and the transport sector: a dynamic industry panel analysis”, Simon Price.