London City Airport will undergo a significant upgrade after a £344 million expansion was given the go-ahead.

It is hoped that passenger journeys will be improved by the new terminal extension, new aircraft taxiway and new plane parking spaces.

The expansion will accommodate more flights at peak times with capacity to handle larger, newer and quieter planes at the airport, a few miles east of Canary Wharf.

It will mean new investments in transport links around the airport, including funding the cost of additional DLR rolling stock (£2.6 million), investing in a bus and taxi access scheme and improving walking and cycle routes to the airport.

The expansion will also create 1,600 new jobs at the airport, not including 500 construction jobs to complete the terminal’s extension, and could potentially pump £1.5 billion into the UK economy by 2025.

Approving the expansion, transport secretary Chris Grayling said: “I am determined to invest in the infrastructure this country needs, to help people get around more easily, boost investment and create opportunities.”

Meanwhile, bosses at Heathrow Airport said that the government must not delay its decision on whether to approve a third runway.