Anyone who understands airline economics will know that longhaul far exceeds shorthaul on a return-on-investment basis for a carrier like BA
Long haul doesn't really work without short haul feed though? Through the Executive Club, BA must know that they have a core of flyers out of MAN based across the Penines that aren't doing all of their long haul on BA. Trying to steal some of those back from KLM and making sure the new B787s and A380s don't leave LHR half empty is a good balancing act.
It would be pointless for BA to compete with these carriers through LHR.
No, that would be the whole point. One does not surrender the market if one doesn't need to. You can drive to MAN, fly to the US then connect on to your final destination, or you can fly straight from LBA and change at T5 to your final destination.