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Stop Bristol Airport Expansion! (SBAE) is an alliance comprised of the following groups:

cpreBristol Friends of the Earth

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All content © Stop Bristol Airport Expansion, 2009.

 

100 months

Commentary on the UWE/Business West report comparing BIA’s Tym economic report with SBAE’s Whitelegg report

31 March 2008

Business West commissioned researchers at UWE to compare two economic reports on the consequences of expanding BIA. One had been prepared by Roger Tym and Partners (Tym) for BIA and the South West Regional Development Agency (SWRDA), while the other had been prepared by Professor John Whitelegg of Eco-Logica for the Parish Councils Airport Association.

As noted below, instead of this being an open and in depth analysis of the methods, evidence and conclusions of those reports, we consider that the new study showed considerable pre-judgment and bias and a weakness of analysis.

Business West has selectively reported some conclusions from this study without making the document as a whole widely available. SBAE believes that it is vital that all such analyses, however flawed, are openly available to the public and decision makers.

Here we present the study report in full, until such time as Business West publish it openly. Below are our criticisms of its methods, evidence and conclusions.

The UWE report for Business West press release pdf document (224 Kb)

The Professor Whitelegg report for PCAA press release pdf document (169 Kb)

The Tym report for BIA press release pdf document (169 Kb)

Summary

SBAE comments

These are responses to sections in the UWE report, not summaries of those sections.

Paragraph 6 of UWE Executive Summary

We agree that Tym is thorough on direct and indirect employment at the airport. However, most of the claims of BIA and the business community are not to do with this, but outline the benefit to users and specifically to business users and to inbound tourism. It is these areas where the Tym report is weak.

Specifically, the survey of business users is very weak. The response level is so low that it is clear that the claims by BIA that it is pivotal and an engine for the economy cannot be true. Even the few businesses giving positive responses are often equivocal.
Given the low response rate, the Tym report tellingly did not test statistical significance.

Paragraph 8 of UWE Executive Summary

The Whitelegg report queries use of multipliers. In fact so does the Tym report, which does not use them but derives them. The key weakness in the Tym report is that the new direct jobs number implies a ratio similar to that already at the airport, but the thrust of development is to minimise jobs per passenger in order to keep costs down. This is an increasing trend for airlines and airports. For example, Heathrow’s new Terminal 5 now has 100% automated check-in and bag drop, while Ryanair charges for checking in luggage, which will reduce baggage handling jobs.

However the main benefits claimed for BIA’s expansion are not the direct jobs at the airport but the implication that there will be wider economic benefits. The Tym report does give very explicit estimates for these catalytic tourism effects based on inbound passenger percentages, length of stay etc and uses these in the main report.

The converse for outbound passengers was absent from the first edition and only added in an appendix of the second edition after pressure from local authorities. This estimate of outbound spend is several times the best case inbound benefits and thus demonstrates a plausible net tourism deficit.

The Whitelegg report’s criticism of inadequate economics is not primarily on the direct and indirect employees, although forward looking ratios may well be optimistic, but on the other elements claimed for inbound tourism, FDI and benefits to business customers.

It is in the inadequate analysis and presentation of the balance of inbound and outbound flows, and inadequate causal analysis that the Tym report fails – i.e. Will expansion increase the benefits and to what ratio? What proportion of those benefits would happen without BIA, or without its expansion?

The UWE report first complements Whitelegg for being clear on his agenda and then criticises him for it - this is inconsistent.

Paragraph 10.c of UWE Executive Summary

The Tym report’s case is incomplete and imbalanced. It only shows the positives and ignores flows that would have happened anyway. It also fails to separate the state of BIA today from the expected benefits of growth and the causal relationship.

It is clear that for the UK as a whole, inbound passengers' spending since 1985 has hardly grown (£9.8bn in 1985, £10.7bn in 2005 in real terms) and, although visits have doubled in that period, the number of nights stayed per visitor has only grown by 50%. Hence trips are getting shorter with little benefit to the UK.

Conversely, UK outbound spending has grown by over four times (£7.9bn to £33.2bn), visits have tripled and total nights spent away have more than doubled.

The evidence here is that the level of ‘suppressed demand’ (i.e. people choose to fly when they would not have done so before due to extra capacity) at the foreign destination airports is significantly lower than in the UK. It is therefore implausible that further expansion will significantly increase inbound tourism spending in real terms. The outbound element has been entirely ignored by the Tym report when totalling tourism benefits.

There is significant independent supporting evidence for the tourism deficit – see references below.

Page 20 of the Business West report

The report states: "We do not accept the [Whitelegg] report's criticism of the BIA Master Plan for failing to "adopt a realistic and transparent economic perspective", in particular in failing to recognise two issues: the large tourism deficit (i.e. tourists leaving the UK spend far more money abroad than in-bound tourists spend in the UK) and, similarly, the large deficit in foreign direct investment (FDI) since UK companies and financial institutions invest far more abroad than non-UK institutions invest in the UK.

“We feel that these criticisms are controversial. Both tourist expenditure in the UK and FDI coming into the country are desirable elements of a modern global economy since both create employment and income-generating opportunities. More important, if BIA expansion leads to any increase at all in the share of national FDI or in-bound tourist expenditure coming to the South West region then this should be viewed as a good thing with positive economic impacts on the local and regional economy.

“The argument that the deficit at the national level means an economic loss to the UK and its regions is not adequately robust, nor defendable. This is because there is no guarantee that the 'opportunity cost' of the net overseas expenditure in both cases would be tourist expenditure or investment actually in the South West region. If tourists intend to travel overseas for a holiday, they are likely to switch departure airports rather than simply take their holidays in the UK."

This is not referenced or supported by evidence or research in the Business West report.

Our criticisms here are:

  1. It is unreasonable that the South West should act autonomously in this respect, i.e. it expects to gain a larger share of the inbound tourism and FDI pie by expanding BIA, but if all other airports are expanding it is not clear how this larger share will be achieved. It is also not robust to accept a national tourism deficit and make it larger
    just to gain some marginal improvement in one region.
  2. The UWE arguments are similarly not robust - they do not produce any evidence that all the trips would happen from other airports if BIA failed to expand. In fact, there is clear evidence (even in Tym) that regional expansion releases ‘suppressed demand’. This means that expansion directly increases flights and outbound spending, with a much weaker inbound flow in line with the national ratios. The UWE report presents no evidence why the South West is a special case in this respect, while the Tym report presents evidence that the current deficit is large.

The Business West report implies that all of the outbound spend would still occur even if BIA did not expand. This totally contradicts the theory of suppressed demand that the Tym report uses to explain recent growth in passengers for regional airports, ie low fares at a nearby airport will create new demand for flights where the same fares further away (or higher fares locally) would not. The Business West report does not quantify the proportion of extra passengers that would have been created through releasing this ‘suppressed demand’ and hence the amount of extra outbound spending caused that would otherwise not have happened.

As Tym reports the outbound spend due to BIA is currently £500 million per year, which is far higher than the stated inbound tourism benefits, for the Business West report to not to try to estimate what fraction of this has been created by BIA’s expansion means that any conclusions that are drawn on tourism benefits are meaningless.

It is like seeing a booming business for the man who sells £5 pound notes for £1, or, in other words, only seeing the revenue and ignoring the cost of sales. This is a fatal flaw in any paper purporting to analyse economic value of a project.

The Business West report also fails to estimate the fraction of the inbound that would have happened without BIA or its expansion, and thus overestimates the inbound benefits due to BIA. Would none of the foreign visitors to Bath, for example, who currently arrive through BIA not get to Bath if they had come some other way?

Page 21 of the Business West report further states:

"Without BIA expansion, it is more likely is that the world's top global companies will be disinclined to locate in the South West region if it so neglects its international travel infrastructure that staff have to undertake long and costly journeys to London or Birmingham before they can make use of a large, modern, genuinely global airport."

This conjecture runs contrary to the evidence, as there is no evidence available to show this is the case.

BIA is already present and usable to link to the outside world. It is clear from the UK Cities Monitor report (2007, by property consultants Cushman and Wakefield) that international links are low on the list of priorities for businesses locating in UK cities, and therefore Bristol. The source of this assumption in the Business West report is not clear. Hewlett Packard, for example, located in Bristol long before BIA was a significant international scheduled airport. If presence of BIA is so crucial, why are so few significant global companies sited in the south of the city?

Page 21 of the report states:

Surveys noted in the Tym Report suggest a great deal of interest among the business community of the South West region in using the airport in the future and BIA expansion should enable that potential interest to be turned into reality.

Again this survey had a very low response rate, and much of that response was from travel related companies. It is not representative of business as a whole that these particular companies favour BIA expansion.

Page 22 of the Business West report

The report then addresses various of SBAE’s own points but provides no quantification of the answers!

"We agree that direct employment gains may not be as great as the largest estimates"

The UWE report accepts that business users could increase without flights increasing – but then refuse to investigate this alternative business plan for the airport, suggesting that BIA’s plans must be the correct course of action!

Page 22 of the Business West report

The report mentions SBAE’s case on infrequency on routes making them unattractive for business users, but then infers that because business users do use the airport, this must be a non-issue. This cannot be considered rigorous analysis.

Page 22 of the Business West report

Again SBAE’s scepticism of BIA bringing in FDI is mentioned, but is then dismissed it because "the business community support BIA". Again, this is not rigorous analysis, especially as there is no comprehensive and representative survey of the regional businesses to show this support.

The UWE report refutes as conjecture the lack of a causal link between the already thriving technology sector and a growing BIA, but gives no evidence to back this up – whereas a report prepared for SWRDA states that there is very little link between the thriving sectors in the area and use of air travel by those businesses:

The relationship between high growth sectors in the region and air travel appears to be weak. Air travel may not necessarily be a pre-requisite for economic growth.

(“Economic Assessment of South West Regional Airports, December 2007,” executive summary, page 5, point 13)

Page 23 of the Business West report

The UWE report then abandons any sense of arithmetic when they quote SBAE directly:

[SBAE state that] This means that BIA is currently enabling a deficit of over £0.5bn per year and plans to increase this to over £1bn per year, to the UK economy as a whole. These figures of BIA's own report tally very well with previous calculations published by SBAE.

The Business West report responds (Page 23):
This is an interesting point but scarcely serves to challenge the case for BIA expansion. Tourism is now the world's biggest industry and offers enormous economic gains if developed properly. Failure to develop BIA would effectively limit future potential growth in this area and divert these gains elsewhere."

In other words, “tourism is a big industry so it must be good for the South West if BIA expands,” a statement that totally refuses to notice that outbound flow dwarfs the inbound flow, acknowledged even in the Tym report that is being appraised. To not even contrast the size of the inbound and outbound flows is a serious omission in the Business West report’s analysis.

Page 22 of the Business West report

The report frequently implies that increased passengers and destinations must be a good thing, yet does not analyse why a route to Pau or Bergerac should bring revenues into the South West.

Conclusion

In conclusion, the UWE analysis itself shows considerable bias, often using "the business community suppports BIA" (Page 22) as the sole evidence required to dismiss our well founded concerns. This is very poor analysis.

References

  1. West of England 2006 Tourism final report (page 28 section 5.2):
    Tourism growth is not guaranteed" and "The prospects for domestic tourism (accounting for over 80% of WoE tourism) look less promising. Whilst outbound tourism (British going abroad) has shown strong and continuing growth, tourism by British people at home appears to be static and some sectors are in decline….. there appears to have been no perceptible increase in domestic tourism since 2000. Mintel 8 are forecasting a drop in the volume of domestic holidays by 2010 with value
    staying around the same.
  2. Travel Trends – report on the 2005 International Passenger Survey, Office of National Statistics, which shows a national tourism deficit of over £18bn, the average spend of inbound and outbound tourists, the correlation between increasing deficit and rise in short haul flights, the relatively low growth rate of inbound
    tourists and their spending (i.e. more capacity is not bringing more inbound tourists).
  3. Evidence presented by Travelodge on 29 January 2008 to the House of Commons Culture Media and Sport Select Committee, chaired by John Whittingdale, Member of Parliament for Maldon and Chelmsford East (Conservative), whose committee is conducting an Inquiry into the UK tourism industry.

    A full transcript of Travelodge's evidence is available on the CMS Select Committee website »

    Travelodge press release summarising their evidence to the Select Committee »

    Travelodge Director of Communications, Greg Dawson, claimed budget airlines "are the single biggest cause of decline in traditional tourism resorts and we urge the Inquiry and Government to investigate the airline's unfair grip on holidaymakers that is squeezing the life out of British tourism."

    Research provided to the Inquiry reveals:
    • Inward tourism spend declined 16% between 1995 and 2002
    • Outward spend increased 48% - creating a tourism balance of trade deficit of £18bn.[annually]
    • The North East region has a tourism deficit of £2.5bn The South West has a tourism deficit of £1.5bn
    • The Midlands has a tourism deficit of £4bn
  4. The Tym report itself (as amended October 2006), Appendix 3, section 4.21:
    UK outbound leisure £526m in 2004, £881m in 2015, £1079m in 2030 (at current prices). This dwarfs any estimate for inbound spend through BIA.
  5. Concern is clear amongst South West Tourism members, with around 40% concerned about competition from low cost airlines, and a similar number concerned about competiton from overseas. See SW Tourism’s “Business Barometer” studies »
  6. Unpublished SWRDA report: “Economic Assessment of South West Regional Airports, December 2007, prepared for SWRDA by Ekos Consulting (and AEA Energy and Environment, who also prepared the carbon emissions section).

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