November 11, 2014

Revised budget increases for UK airport expansion should come as no real surprise

Somehow it seems that where construction budgets for major projects are concerned, the UK has a reputation for being very ‘hit and miss’. The announcement that the cost of expanding either Heathrow or Gatwick through the creation of an additional runway will require additional billions in funding really shouldn’t be a surprise. However it does highlight the seeming inability for major projects to come up with a realistic and feasible budget on a regular basis. Why is it that the construction of terminal 5 at Heathrow in 2008 came in at £1bn over budget, yet the £2.5bn reconstruction of terminal 2, finished in June 2014 came in on budget? The 2012 Olympics in London managed to exceed its budget by £2bn overall, and ‘The Shard’, dominating the City of London skyline, managed to come in at a construction cost of around £1.5bn compared to the initial £350 million initially mooted when planning permission was first obtained.
In December 2013 it had been estimated that the cost of expansion and creating a new third runway at Heathrow would come in at £17bn. However the Airports Commission, which was set up by the government two years ago, has announced that the figure has already increased by between £3bn and £4bn in less than a year. In addition the Airports commission announced that the cost of building a second runway at Gatwick, estimated at £7.8bn in July 2013 has now increased by £2bn. Because of these increased costs at Heathrow, despite the potential economic benefits to the region, passenger costs may well have to be increased to compensate. The Commission has been tasked with providing a final report by the summer of 2015.



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