UK aggregates market under scrutiny

By Sandy Guthrie10 September 2010

The UK aggregates sector is being studied by the Office of Fair Trading (OFT) to ensure that the market is "as competitive as possible".

The British Aggregates Association (BAA) said the investigation was "overdue and is something we have long called for".

The Mineral Products Association (MPA) said it was confident that the operation of the current mineral planning system would be proved to be sound. "The system has a proven track record of delivering a steady and adequate supply of aggregates over the last 35 years throughout periods of recession and growth," it said.

The OFT said that aggregates was a sector with high barriers to entry, increasing concentration at the local level, and government involvement in the form of a national system of control over outputs.

The study, it said, would look at all of these factors to determine how they influenced competitive conditions and whether the market delivered good value for money to taxpayers and end consumers, as the cost of aggregates flowed through to the construction of essential infrastructure.

It said the aggregates sector was substantial, with a turnover in 2008 of € 5.8 billion.

Heather Clayton, senior director of infrastructure at the OFT, said, "In the present climate, well-functioning markets are even more important to help spur economic growth.

"Aggregates is an important sector in its own right but it is also part of the larger construction industry which plays a key role in the country's economy. Because the cost of aggregates is reflected in the price consumers, and taxpayers, pay for essential infrastructure, from housing through to roads and major capital building projects, it is important that the market is as competitive as possible."

The BAA said its primary concern was the "UK market domination by five world players". It said the environmental, logistical and social factors indicated that aggregates should be produced as locally as possible, reducing delivery mileage, and underpinning local economies.

"However," said the BAA, "the opposite has happened, with the majors buying out and closing down viable quarries. The majors also practise vertical integration, which effectively disadvantages SME producers."

It added that there was "an archaic planning system which fails to take proper account of competition issues. This has allowed the majors to dominate the consented reserve landbank in many areas as well."

It claimed, "The continuing illegal State Aid of the Aggregates Levy, which skews the market for primary and secondary aggregates as well as stimulating imports, is a major problem, and the rising tide of inappropriate EU-driven legislation yet another.

"These factors, in addition to the lack of proper competition, have resulted in some areas of the UK having the most expensive aggregates in Europe, despite them often having substantial mineral reserves."

BAA director Robert Durward said, "In areas of the country where few independent companies remain, prices are a great deal higher. The majors therefore have the ability to use this revenue stream to subsidise their activities in other areas to the detriment of smaller operators. The Minerals Products Association's response to the OFT announcement ­- defending the status quo in minerals planning - disregards the plight of smaller companies."

The OFT said it would be speaking with key parties directly, but that anyone who wanted to make a submission can do so via email at by October 15. The market study is expected to be completed by July 2011.

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