London City Airport is to undergo a £344m (€410.2m) expansion.

The airport will get an extended terminal, new aircraft taxiway and parking spaces for planes.

The UK government approved the planning decision this week.

The scheme is expected to create 1,600 airport jobs for staff and 500 construction jobs, and the government said the expansion could contribute £1.5bn to the economy by 2025.

In February, the Alberta Investment Management Corporation, the Ontario Municipal Employees Retirement System and the Ontario Teachers’ Pension Plan joined Kuwait’s Wren House Infrastructure Management in a deal to invest as much as £2bn in the terminal.

Credit Suisse’s Global Infrastructure Partners (GIP) said it grew passenger numbers from 2m in 2005 to 4.3m last year.

The airport, near Canary Wharf, was sold by Oaktree’s infrastructure fund manager, Highstar Capital and GIP – almost 10 years after the latter entered a 50/50 joint venture with AIG to buy the asset from Dermot Desmond.