Heathrow delay endangers investment in Britain

By Kate Holton

LONDON, Dec 11 (Reuters) - Britain's inability to decide where to build a new airport runway after 25 years of deliberation is the latest major infrastructure delay that risks hurting investment in the world's fifth largest economy.

Prime Minister David Cameron, who had guaranteed a final decision by the end of this year, has been accused of putting short-term politics over long-term economic gain by delaying approval until next year.

The decision on whether to build a new runway at Heathrow in the densely populated west of London, or at Gatwick to the south, will now come after the mayoral election in May.

The candidate for Cameron's Conservative Party had threatened to resign if the government backed Heathrow, which an independent report commissioned by the prime minister said was the best place for expansion.

After the delay was announced, the boss of British Airways parent IAG threatened to quit the company's base at Heathrow.

"Some people may say that we have no other option," said Willie Walsh. "Actually we do. We can develop our business via Madrid which has spare capacity and Dublin where there are plans for a cost-effective and efficient second runway."

Joanne Segars, head of national body the Pensions and Lifetime Savings Association, said pension funds wanted to invest in infrastructure.

"But for pension funds to be able to invest further they need a pipeline of suitable projects and a stable planning environment," she said.

Britain last built a new full-length runway in the southeast of the country shortly after World War Two and successive governments have failed to placate those living in the affluent neighbourhoods that lie under the flight paths.

LOSING PASSENGERS

Research group Oxford Economics estimates that the aviation sector contributes 52 billion pounds ($79 billion) to the British economy, or 3.4 percent of gross domestic product.

But the two biggest airports, Heathrow and Gatwick, are close to maximum capacity and losing passengers to booming hubs like Dubai in the Gulf and Amsterdam's Schiphol.

Cameron ruled out a new runway at Heathrow in 2009, "no ifs, no buts", but the government-appointed commission said earlier this year that the west London site should expand.

On Thursday the government, which is split over the issue, said it needed more research on the environmental impact which should take around six months. On Friday the transport minister said he was "hopeful" a decision could be reached next summer.

The constant delays to airport expansion mirror those endured by other major infrastructure projects. Terminal 5 at Heathrow was first proposed in the 1980s and opened in 2008 after the longest planning process in British history.

Crossrail, a cross-London mainline rail route was first suggested in the 1940s, but it took until 2001 before a company was formed to develop the scheme. It (Other OTC: ITGL - news) is due to start operating in 2018.

The delay to the airport expansion also introduced more uncertainty over the likely outcome. The Airports Commission had selected Heathrow as the preferred option for a new runway but the government merely said it accepted the need for a new runway and that Gatwick remained in the running.

Heathrow said it remained confident that it would eventually be chosen and said a new runway could be open by 2025. ($1 = 0.6572 pounds)

(Additional reporting by Paul Sandle and Sinead Cruise in London and Victoria Bryan in Berlin; editing by Estelle Shirbon)