Appraising transport’s impact on the ‘real’ economy

New economic thinking is being injected into the way transport projects are appraised. While the assessment of transport schemes has always included economic interests in terms of things such as the amount of time saved, increased fuel efficiency and safety gains, the UK government is now looking at the bigger picture – using the new Wider Economic Benefits (WEBs) methodology to ensure that the full range of benefits is captured.

WEBs arise as businesses and employees take advantage of increased accessibility from improved transport links – accessibility to jobs, markets, suppliers and other organisations – resulting in productivity gains outside of conventional transport appraisal.

Steer Davies Gleave has undertaken a large number of WEBs assessments, including a recent study of the proposed AirTrack rail service to London’s Heathrow Airport on behalf the AirTrack Forum.

The service will connect Waterloo, Reading and Guildford to Heathrow Terminal 5 and will run mainly on existing infrastructure, although a new spur from Staines to the airport will be needed.

The scheme’s viability and value for money have already been confirmed – one recent business case found a benefit-cost ratio (BCR) of 2.7. However, in anticipation of the required planning process, the AirTrack Forum wanted a better understanding of the national and regional economic impacts of the scheme, and to assess the WEBs in a way that was consistent with the UK Department for Transport’s (DfT) guidance.

Our study identified not only the additional appraisal benefits, which increased the scheme’s BCR from 2.7 to 3.5, but also the broader contribution to the economy of London and the South East. AirTrack will deliver an estimated £45m in productivity gains to the South East and nearly £30m to London in 2031. The total contribution to the UK economy over the appraisal period will amount to more than £750m in net present value terms.

These findings help to establish AirTrack as a solid scheme in value-for-money terms. And in the course of our work, we were also able to show that the scheme will play an important role in supporting key national, regional and sub-regional economic and transport strategies, not least by encouraging a mode shift from car to public transport. This conclusion, together with the strongly positive local economic impacts that we identified, will be important evidence in support of the AirTrack scheme during the forthcoming Transport and Works Act inquiry.

Our findings for AirTrack confirm one of the key conclusions emerging from recent research on WEBs that we undertook for the Centre for Cities last year. Assessing the full range of economic benefits from transport interventions is very important in setting priorities, both between individual transport schemes and policies, and between transport investment and public spending in other areas. Given the DfT’s determination to include WEBs analysis as part of a ‘refreshed’ transport appraisal methodology, it will be essential for Regional Development Authorities and other bodies with a major role in transport policy formulation to assess these benefits in a rigorous way.

Lars was formerly an economist at the Department for Transport, where he developed the Department’s guidance on the assessment of Wider Economic Benefits. He now leads Steer Davies Gleave’s capability in this area and continues to contribute to leading edge thinking on WEBs methodology.