Rachel Reeves, Britain’s top finance official, on Wednesday laid out plans to revive the country’s flagging economy, including supporting the addition of a third runway at Heathrow Airport, after her first budget rocked business confidence.
An additional runway is “badly needed” to increase trade and investment, 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 in the British economy, 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, 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 actions that can have more immediate payoffs.
“I will go further and faster to kick-start economic growth,” Ms. Reeves said as she rattled off various reforms, private investments and pledges to increase housing and other infrastructure projects.
Ms. Reeves also said the government was pushing ahead plans to develop transport links and housing between Oxford and Cambridge, two leading universities about 66 miles apart. It follows announcements to make it easier to build houses near commuter train stations and making it harder for environmental groups to block infrastructure projects in court.
Ms. Reeves and Keir Starmer, the prime minister, vowed to “fix the foundations” of the British economy when they entered government, but their plans got off to a challenging start. The most memorable aspect of Ms. Reeves’s first budget was a 40-billion-pound ($50 billion) increase in taxes, much of which will come from employers paying higher taxes for their workers. That has raised worries about job cuts.
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 around the world 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.
Ms. Reeves’s first trip this year was to China to push for more investment, restarting high-level economic talks after a six-year break.
To stimulate growth in Britain, lawmakers have told regulators they need to “tear down the barriers hindering business.” As a result, regulators delayed putting in place some banking rules for a year, waiting to see what the Trump administration would do. And the chair of the Competition and Markets Authority, Britain’s antitrust regulator, was also 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 in the outlook 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 financial 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 a government decision on 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.”
