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Gatwick airport has warned that plans to invest billions in a new runway and airport upgrades could be jeopardised if ministers push through a fourfold increase in its business rates bill in next month’s Budget.
The airport’s investors are preparing to make the final investment decision on a £2.2bn expansion to open a long-awaited second runway that was approved by ministers last month. They are also planning to invest around £2bn in expanding facilities and upgrades.
The UK’s second largest airport currently pays about £40mn in business rates annually.
However, the government’s Valuation Office Agency (VOA) has indicated to the airport that rates could rise by 300 per cent, pushing its bill as high as £160mn — close to Gatwick’s annual entire staff bill of £180mn.
“We have made crystal clear to [the] Treasury that what we are really looking for is tax treatment that incentivises us to invest,” said Stewart Wingate, who was chief executive of Gatwick airport for 15 years and is now head of the UK for Vinci airports, its major shareholder.
“We are looking down the barrel of having a [rates] bill that quite unbelievably could be equivalent to staff costs. Frankly, that is neither fair, nor proportionate to our business,” he said.
In its submissions to the government, the airport warned that any increase in business rates of more than 40 per cent above its current levels — which would take its annual bill to around £56mn — would eat into its profits so much that it weighs on investment decisions.
Accounts for 2024, the most recently available, show the company made a pre-tax profit of £294mn.
“We have laid out the 40 per cent cap, to make it clear that so long as the business rates increase fall within that cap, we will push ahead running the business and investing in the business,” Wingate told the FT.
“Any increase above that level is something that will be food for thought for our investors, before we commit ourselves one way or the other,” adding the airport would have to consider “the consequences” of any final decision by the government.
Gatwick’s £2.2bn expansion would see its backup runway moved 12 metres, to be used alongside the existing one. The airport believes the project would create around 14,000 jobs, and help to grow passenger numbers to 80mn a year.
Airports in the UK are increasingly concerned they are facing a steep increase in business rates, after a change in the methodology used by the VOA.
The new band comes into force in April 2026. Gatwick was told by the VOA in November last year that the rate could be a six-fold increase on current levels. Its latest discussions with the agency indicate a four-fold rise.
Chancellor Rachel Reeves is expected to raise taxes in the Budget on November 26 to plug a hole in the nation’s finances estimated at between £20bn-30bn.
However businesses — which were hit by a £26bn increase in employers’ National Insurance last year — have warned that significant business rate increases would impact many crucial sectors, including the high street.
In addition to its 40 per cent cap, Gatwick has asked the government for an overhaul of the way rates are set in order to give long-term certainty to its international investors.
“It’s nigh on impossible to budget the business for the calendar year 2026, when the cost line was so “unpredictable and volatile”, Wingate added.
The Treasury said: “Business rates valuations are set independently by the VOA. We support those hit hardest by revaluation increases and continue to engage with the sector on their concerns.”