CHANCELLOR George Osborne said “all options” need to be looked at to increase airport capacity in the South East, after reports that a consortium want to build a four-runway airport in Oxfordshire.

But Mr Osborne yesterday said he had also not ruled out a controversial third runway at Heathrow airport to deal with growing demand.

The Chancellor spoke as it was reported in The Independent on Sunday that an unnamed group of British businesses has commissioned a “world-leading infrastructure firm” to assess potential sites to the west and north of London which could rival, or even replace, Heathrow.

The paper claimed the consortium has opened talks with Chinese sovereign wealth funds over the financing of the project, which could cost between £40bn to £60bn. And it named Banbury and Twyford in Berkshire as two possible locations with good rail links to London.

Department for Transport spokesman Jon Rhodes said: “In the medium term the UK does face a capacity challenge, especially in the South East, and it is this challenge we will seek to address in the call for evidence later this year.”