The Office of Fair Trading has launched an investigation into the UK aggregates sector after complaints of elevated prices and domination by a small number of major players, reports Construction News.
The OFT said the £4.8bn-a-year aggregates sector has high barriers to entry as small firms find it increasingly difficult to operate in a market dominated by five major firms. Corporate giants Aggregate Industries, Tarmac, Cemex, Lafarge and Heidelberg Cement have formed following a wave of recent merger deals.
The OFT investigation will examine barriers to entry, the effect of consolidation on local competition, as well as Government controls over mineral extraction.
It will also assess whether the market offers value for money to taxpayers, said the OFT’s senior director of infrastructure Helen Clayton: “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, so it is important that the market is as competitive as possible.”
The evidence-gathering phase of the study is expected to last four months. Depending on its findings, the watchdog could take enforcement action, refer the market to the Competition Commission, or recommend changes to the law or regulations.
Building reported a positive reaction from aggregate producers, which it said intend to comply fully with the investigation. A spokesperson for the Mineral Products Association said: “We are confident that the operation of the current mineral planning system will be proven to be sound, and critical to the construction and manufacturing industries which depend upon these essential supplies …The current system originated in 1975 as a result of Sir Ralph Verney’s Royal Commission and has generally worked well since.”
The construction sector is still smarting after the OFT imposed fines totalling £129.5m on 103 construction firms found guilty of cover pricing last September, while an investigation into construction recruitment price-fixing resulted in fines of £39.27 m for six recruitment agencies.
