By Rhys Jones and Maria Golovnina
LONDON (Reuters) - Prime Minister David Cameron is coming under intense pressure from business leaders and airlines to end years of deadlock and decide whether to expand London's overstretched Heathrow airport - something that will infuriate local voters and some members of his own party.
The decision will affect 750,000 people living under Heathrow's busy west-London flight path who are worried about aircraft noise, pollution and safety.
For Heathrow, the stakes are high. Without new runways and airports Britain risks turning into a global aviation also-ran as competition heats up from more attractive hubs in Europe.
"The government must stop tiptoeing around on aviation because of short-term political considerations," said John Longworth, director-general of the British Chambers of Commerce.
"Unless politicians grasp the nettle and make some tough decisions, both our export and inward investment potential will suffer."
Heathrow is the world's third-busiest airport but it is close to full capacity. The government must decide whether to expand it or consider several other options such as building a new hub elsewhere in the London area.
Under pressure from liberals and green groups, Cameron's Conservative-led coalition opposed building a third Heathrow runway after it came to power in 2010. It also ruled out expanding London's secondary airports at Gatwick and Stansted.
Although the tens of thousands who work at Heathrow would disagree, the idea of another runway is unpopular with many local voters as it would increase the number of planes flying over the densely populated and leafy suburbs of western London.
But with demand for air travel expected to more than double in Britain to 300 million passengers per year by 2030, speculation has been growing that Cameron could still go back to the Heathrow plan which he appears to favor.
The debate heated up this month with the launch of a government-appointed commission to review all available options and finally decide what to do.
It is already a hot issue for the next general election. Since the commission is not due to report until after the 2015 vote, observers believe that would give Cameron a chance to perform a U-turn and revert to the Heathrow expansion plan.
Either way, the industry is frustrated.
The lack of action has led the bosses of IAG's British Airways and Virgin Atlantic - normally the fiercest of rivals - to join forces to form the so-called "Aviation Foundation" to put pressure on the government.
In a strongly worded report, former deputy prime minister Michael Heseltine criticized the government's aviation policy, saying it was holding back economic growth.
"The world is increasingly competitive and we have to respond to that or we will slip gradually down the world's growth league tables," he said.
Both in government and among families living under Heathrow's flight path, emotions are running high.
Plastic signs reading "No third runway" adorn the lamp posts of Harlington, a village on the edge of Heathrow where local activists have campaigned against expansion plans for a decade.
Hundreds of homes are likely to be demolished to make way for the proposed third runway, and air pollution from aircraft engines and airport machinery is likely to increase sharply.
As planes roared overhead, Peter Bandreth, head teacher of a local school, said he feared for the community if Heathrow were expanded.
"At the end of the day if all the nearby houses are knocked down there'll be no school", he told Reuters at the William Byrd primary school where seven new classrooms have been built to meet rising demand for places.
A study by the Massachusetts Institute of Technology suggested last month that expanding Heathrow would lead to about 150 premature deaths from air pollution per year, up from 50 now, while building a new hub would kill 50 people a year.
Airport expansion is a headache the world over as the interests of airlines and airport operators trying to meet growing demand for air travel conflict with residents whose property values are hurt by planes roaring overhead.
Heathrow has seen traffic to emerging markets rise in recent years but is falling behind rival European hubs in the battle for these lucrative routes because of the constraints on growth.
Spanish infrastructure group Ferrovial is the largest shareholder in Heathrow, where a third runway would cost 10 billion pounds ($16 billion) and take six years to complete.
Colin Matthews, CEO of Heathrow, said Britain must urgently build better links to fast-growing economies such as a China, India and Brazil.
"If we take years thinking about this and then say 'now we're ready' to all these Chinese businesses they will turn around and say they have already established their base and their network in Holland or France," said Matthews.
A study by the Frontier Economics consultancy has shown Paris Charles de Gaulle and Frankfurt have 1,000 more annual flights to the three largest cities in China than Heathrow.
Today, multinational businesses like GlaxoSmithKline, Miscrosoft and Cisco have offices near Heathrow, but business groups such as London First fear major firms could move their European bases to the continent if Heathrow cannot add routes to emerging markets.
Global accounting firm KPMG has already moved its European base from London to a building near Frankfurt airport.
In Britain, airport capacity is an issue that has put London's popular Mayor Boris Johnson on a collision course with Cameron's government this year.
Johnson, a Conservative tipped by some as a possible future prime minister, is riding a wave of popularity following London's successful Olympic Games.
He is against Heathrow's expansion and has been pushing for a new four-runway hub in the Thames estuary - a 50 billion pounds ($80 billion) project known as "Boris Island".
"What you can't do, and what is completely wrong for this country, is to continue to put a quart into a pint pot, continue to expand Heathrow ... and inflict more and more misery on the people of west London," Johnson told the BBC.
There are other options. Ken Shuttleworth, the architect of the distinctive London office building known as the Gherkin, has unveiled plans for a four-runway Stansted hub capable of handling 150 million passengers a year.
Single-runway Stansted, 30 miles northeast of London, could be connected to Heathrow by rail to create a 'dual hub', according to Make, a firm of architects, but aviation officials say such a scheme would pose too many difficulties.
Meanwhile, people living near Heathrow say their lives have become hostages to political wrangling.
"It's a bit of an oasis here," said Bandreth, the local teacher. "But that would all change."
(Additional reporting by Stephen Eisenhammer; Writing by Maria Golovnina; Editing by Giles Elgood)