The Valuation Office Agency’s application of the receipts and expenditure (R&E) methodology to UK airports has resulted in rateable values that represent a multiple-fold increase from historical levels, with many airports facing rates exceeding 20% of revenue—higher than seen in comparable infrastructure sectors such as energy distribution, telecoms, and rail. This substantial divergence raises questions about whether the methodology has been appropriately applied to the unique characteristics of airport operations and their regulatory obligations.

This report, prepared by Oxera for AirportsUK, examines the appropriate application of the R&E methodology for establishing rateable values for airports. The report identifies three key areas requiring methodological adjustment: first, all repair and renewal expenditure must reflect the hypothetical tenant’s responsibilities as the airport operator and licence-holder; second, the tenant’s share of the divisible balance must account for their higher risk exposure due to lower priority of claims, higher revenue risk, and higher operational gearing; and third, valuations must consider sufficiently long time periods, appropriately adjusting for pandemic impacts and applying relevant inflation indices.

The report concludes that implementing the recommended adjustments to the implementation of the R&E methodology would bring rateable values of airports closer to comparable infrastructure sectors.