U.K. Government Backs Heathrow Expansion in Push for Faster Growth

Rachel Reeves’s first few months as Britain’s top finance official has been marked by a steady drumbeat of bad news: a “black hole” in the public finances, higher taxes and low growth. On Wednesday, Ms. Reeves sought to change Britain’s prospects by laying out plans to boost the economy, including supporting another runway at Heathrow Airport.

An additional runway is “badly needed,” Ms. Reeves said in a speech to business executives. The debate about whether to expand the airport, which would be one of the largest infrastructure projects in Europe, has been running for more than two decades. “As our only hub airport, Heathrow is in a unique position and we cannot duck the decision any longer,” she said.

In recent weeks, Ms. Reeves has ratcheted up her efforts to spur growth, making numerous announcements and stressing optimism about the country’s outlook.

“Low growth is not our destiny,” she said on Wednesday. “But growth will not come without a fight.”

It’s a notable change in pace and tone from when Ms. Reeves became chancellor of the Exchequer last summer and warned of the dire state of the economy. At the time, she introduced measures like planning system reforms and a National Wealth Fund to encourage public and private investments, but those changes will take time to bear fruit.

Now, as companies and investors question whether her budget will generate growth and the global economy rapidly reorients around President Trump’s plans, there is an emphasis on more immediate payoffs.

“I will go further and faster to kick-start economic growth,” Ms. Reeves said.

Like many of the government’s plans to stimulate growth, the Heathrow expansion would be privately financed. It has faced stiff local opposition as it would include knocking down homes and building a large tunnel. But Ms. Reeves said the new runway would create 100,000 jobs, increase capacity for trade and reduce the number of planes circling overhead before they land.

The government was clearing a path for plans to develop transport links and housing between Oxford and Cambridge, two leading universities about 66 miles apart. Ministers will also make it easier to build houses near commuter train stations and make it harder for environmental groups to block infrastructure projects in court.

A rout in the global bond markets earlier this month hit Britain particularly hard as investors warily eyed the country’s low growth and stubborn inflation. A surge in borrowing costs threatened to upend Ms. Reeves’s fiscal plans.

Ms. Reeves is also trying to adapt to a swiftly changing global economic environment with the return of Mr. Trump to the White House. Businesses and lawmakers are preparing for higher tariffs, less regulation and more incentives for firms to move to the United States.

“If the U.S. implements what President Trump is talking about, then you will see a trend towards deregulation in many competitor countries, including the U.K.,” said Mahmood Pradhan, head of global macro economics at Amundi, an asset manager.

Ms. Reeves and other ministers have been pursuing actions that they say could “turbocharge” growth and investment. The economy grew 0.1 percent in the third quarter and is forecast to have slowed to zero in the last three months of 2024.

Ms. Reeves’s first trip this year was to China, restarting high-level economic talks after a six-year break.

To speed up growth in Britain, lawmakers have told regulators to “tear down the barriers hindering business.” As a result, regulators delayed putting in place some banking rules for another year, waiting to see what the Trump administration would do. And the chair of the Competition and Markets Authority, Britain’s antitrust regulator, was recently replaced.

Investors were troubled by the antitrust authority, and so the change in leadership was “an encouraging sign,” said Duncan Edwards, the chief executive of BritishAmerican Business, a trans-Atlantic lobby group.

“It’s hard to move away from the fundamentals though,” he said. “People are a bit frustrated.”

There are some bright spots for the British economy: An increase in public spending is set to lift growth this year. Many analysts predict the Bank of England will lower interest rates more than markets suggest, easing pressure on mortgage holders and businesses. And global chief executives said Britain was the second-most attractive destination for investment, after the United States, according to a survey by PwC.

But there are concerns that growth will not come quickly enough to bring down debt levels and avoid further spending cuts or higher taxes.

“Analysts and markets fully understand that growth will take time,” said Mr. Pradhan of Amundi. But the government is setting fiscal policy based on tax revenue that requires a certain amount of growth and if that growth does not materialize, he said, “then you have a budget problem.”