Will UK Regional Airport Tax Hikes Force Air Fare Prices to Climb?

Air passengers face air fare price warnings as UK regional airports brace for major property tax hikes next year. The increases stem from a significant property tax overhaul and the 2023 business rates revaluation. This change has revealed regional airports are among the hardest-hit sectors in the UK. The new tax structure risks dampening crucial airport investment plans and regional economic growth.

Unprecedented Cost Shock

Analysis of official Government data shows the most extreme cases are outside London. Global tax firm Ryan calculated the rateable values. Their findings show values have jumped more than six-fold in some instances. This sends the tax bills soaring to unprecedented levels.

An expert from Ryan reported an “unprecedented 295% sector-wide uplift”. Regional airports cannot simply absorb a cost shock of this magnitude. The tax hike is set to be phased in over three years. Most airports will see their total bills more than double in this timeframe.

Valuation Office Agency Data

The Valuation Office Agency (VOA) data underpins the revaluation. The VOA changed its valuation method for major airports. It moved from a replacement cost approach to a Receipts and Expenditure (R&E) method. This new method bases the value on expected profitability. The valuation date used was April 1, 2021, during the pandemic. The subsequent recovery in travel volume drove the massive increase in rateable value. The revaluation is the first in six years, reflecting market changes.

Even with transitional relief limits, which cap increases at 30% next year, the cash increases are substantial. This relief is meant to phase in the very large increase. However, the full impact is expected by April 2026. The total payable by the airport sector could exceed £1 billion. For more details on the industry's response, check the latest commercial aviation news on flying.flights.

Regional Airport Impacts

Several key UK regional airports face significant business rates increase bills. Manchester Airport is among the worst affected. Its annual bill is set to surge by £4.2 million to £18.1 million. Bristol Airport will see a £1.2 million increase to £5.2 million. Birmingham International Airport expects a £1.8 million hike to £7.6 million.

Other regional hubs are also facing steep rises. Liverpool Airport's bill will rise by £233,100 to £1 million. East Midlands International Airport faces a £437,895 increase to £1.9 million. Newcastle International Airport is in line for a £244,755 hike to £1.1 million.

Industry and Passenger Consequences

Airport operators warn the tax blow will impact investment. A Manchester Airports Group spokesperson stated the increases threaten their £2 billion investment plans. The group operates several major UK airports. They warned that air travel will become more expensive. This affects both travelers and global trade for businesses.

Industry experts confirm the cost will flow through the system. It will first be seen in airport charges hike. This will then translate into higher airline costs. Ultimately, it will result in higher air fare price warnings for passengers. AirportsUK, the sector's trade group, called the plans “short-sighted”. They warn the changes risk negatively impacting local economies. The trade group is engaging with the Treasury on a long-term review. They seek a positive outcome to drive investment and economic growth. The trade body warns the rise is equivalent to doubling the corporation tax. This is a major concern for the entire aviation industry. The long-term impact on competition is a significant worry. The increases may lead to route cancellations. This would reduce choice for British travelers. The International Air Transport Association (IATA) monitors such regulatory impacts globally.