U.K. Chancellor backs third Heathrow runway, cuts regulation in a bid for growth

Britain’s Chancellor of the Exchequer Rachel Reeves speaks in Eynsham, England on January 29, 2025.
| Photo Credit: AP

Following months of  poor economic growth numbers and depressed business sentiment following a tax hike announced in her October budget, U.K. Chancellor Rachel Reeves signalled on Wednesday (January 29, 2025) that Britain was not destined to decline, as she announced a slew of projects and regulatory changes.

“Low growth is not our destiny. But growth will not come without a fight,” Ms. Reeves told business leaders at a Siemens medical equipment factory in Oxfordshire. She defended her October budget that included a £25 billion increase in employer payroll contributions as necessary to “fix the foundations” of the economy.

Among the plans Ms. Reeves laid out was the creation of a “growth corridor” between Oxford and Cambridge, which, as per the Chancellor, had the potential to become Europe’s ‘Silicon Valley’. Ms. Reeve’s also announced that the UK government would officially back a third runway at London’s Heathrow airport. A third runway, which has been opposed by environmental groups, was officially approved first by the former Labour government in 2009 but failed to take off under successive governments.  

The Chanellor also reiterated that the government was looking into the visa regime for “very highly skilled people”. Last week, Ms. Reeve’s had suggested that visa reform would be focused on AI and life sciences professionals.

Ms. Reeves said on Wednesday (January 29, 2025) that her government would build on the the U.K.-U.S. “special relationship” with the new U.S. administration of Donald Trump. She announced a reset of ties with the European Union, blaming the Conservatives for not engaging with the bloc, which is the U.K.’s largest trading partner. The Chancellor also said the U.K. would continue strengthening ties with emerging economies such as India and China.

Ms. Reeves confirmed that Trade and Business Secretary Jonathan Reynolds would visit New Delhi in February 2025 to restart talks for a Free Trade Agreement (FTA), which has been under negotiation since January 2022.

Flatlining Economy and Low Productivity

Plagued by low productivity and a slow post-pandemic recovery, the U.K. did not grow in the second half of 2025 with the government hoping business and investor sentiments would be buoyed by falling inflation and positive growth forecasts (the IMF projected 1.6% real GDP growth for the U.K. in 2025).  

Prime Minister Keir Starmer, previewing the announcements in an article in The Times on Tuesday (January 28, 2025), said his government would “clear out the regulatory weeds”, likening this to former Conservative Prime Minister Margaret Thatcher’s deregulation policies.

Former shadow Chancellor and Labour MP John McDonnell, who was suspended from the party in July 2024 for voting against a government policy, said the extra runway decision would cause “an irreparable scale of damage on the government”.  London’s Labour Mayor, Sadiq Khan, told the BBC that he was also opposed to the runway on environmental grounds.

Citing the case of the HS2 high speed railway project needing to spend £100m to protect a bat corridor, Ms. Reeves said she was reducing regulation for developers who paid into a nature restoration fund “so they can focus on getting things built and stop worrying about the bats and the news”.