Heathrow faces near billion-pound rates time bomb

Heathrow has been engaged in private discussions with Whitehall officials as the airport braces for a £900m business rates bill that could be passed on to passengers.

The Sunday Times has revealed that Europe’s busiest airport—already the biggest rate payer in the UK—could see its annual bill rise from £200m to £300m over three years, starting from 2026.

The airport has kicked off the discussions over fears that the higher bill will sour relations with carriers, such as British Airways and Virgin Atlantic, as the higher rates will be passed on through higher charges.

An analysis by the Sunday Times suggests that with Heathrow seeing an estimated 80m travellers annually, the increased business rates bill could equate to an estimated additional charge of £3.75 per passenger.

The additional cost would also absorb hundreds of millions of pounds, which cannot be invested in Heathrow.

Labour’s pledge to scrap the business rate system, unveiled in its manifesto last week, could offer some respite for the airport. However, only time will tell whether this proposal will directly affect airports as the party has promised to prioritise small businesses and high street retailers.

Calculations for Heathrow’s business rates changed in 2023. The bill is now based on its profitability, and in 2026, the rates will be based on its 2024 returns.

So far, the airport has generated a £189m pre-tax profit in the first three months of the year, with a record number of annual passenger numbers in the past year.

“Airports and airlines agree — this decision needs a rethink. Huge hikes in business rates simply increase costs for consumers without adding a single pound of investment to the services they are using,” a Heathrow spokesperson said.

“The whole sector wants to see more joined-up thinking between government departments to avoid decisions like this, which only curb our ability to compete internationally and meet consumers’ demands for smooth, safe journeys and progress on sustainability,” the spokesperson continued.