Theresa May’s new government is being urged to make an urgent decision on expanding airport capacity while also cutting Air Passenger Duty to boost the post-Brexit economy.

The call comes from cross-part MPs who make up the British Infrastructure Group (BIG) led by former Conservative party chairman Grant Shapps.

The report by the group says a lack of runway capacity at Heathrow is causing “substantial damage to the industry as a whole”.

The MPs say the government should also look to expand regional airports and cut APD, which is “many times the rate of similar taxes in European competitors and trading partners such as the US ”.

They add: “The tax rate is higher than in any other country except Chad. APD hinders exports, distorts the market and hits small carriers hard.

“As the UK seeks to forge new trading relationships post-Brexit, we can’t afford to maintain any barriers to trade, including APD. BIG believes that a lowered rate, by boosting the wider economy, would eventually be cost neutral for the Treasury.”

The MPs write that, while not dictating to the prime minister on whether to green light expansion at Heathrow or its rival Gatwick, a decision on how to increase capacity in south-east England is now urgent.

“Either Heathrow or Gatwick must expand. If Heathrow does so, it will have to fulfil various pledges towards regional aviation, including new domestic routes and a £10 million route development fund. If Gatwick expands, it has similar promises to fulfil, though on a smaller scale.

“This report concludes that the government must select the new hub as a matter of extreme urgency. The decision on EU membership has not altered this fundamental fact. We believe this choice should be one of the first across the new prime minister’s desk.”

Shapps, who was the party’s co-chairman until 2015, told The Guardian: “Following Brexit, this decision is all the more important. We need to show Britain is open for business.”

His call was echoed at the weekend by new trade secretary Liam Fox, who said: “ we can build infrastructure capacity which is itself a springboard to improved international trade performance, like airport expansion. We are in a very competitive economic climate and we can’t put off big decisions for infrastructure.” 

New transport secretary Chris Grayling has said he wants to “move rapidly” with a decision on a new runway to provide “certainty” to business.