Cement firms face competition probe

An initial investigation into the £3.4bn a year industry suggested that a flurry of deals may have over-consolidated and distorted the market.

As a result, the Government may have been paying too much for aggregates, cement and ready-mix concrete used in the building of schools, hospitals and roads, the Office of Fair Trading (OFT) said.

It found that just five major firms controlled more than 90 per cent of the cement market, 75 per cent of aggregate sales and 68 per cent of ready-mix concrete production.

Earlier this year, Tarmac owner Anglo American and France’s Lafarge announced plans to combine their UK ventures, further consolidating the market.

Both companies are among the firms being looked at in the OFT’s market study alongside Hanson UK, Cemex and Aggregate Industries.

The Competition Commission will conduct a more detailed probe into the market once the OFT has consulted with major firms in the sector.

The commission may force larger companies to divest or break up their UK interests if anti-competitive practices are found.

The issue is of particular concern to taxpayers as central government is the industry’s biggest customer and 40 per cent of all construction expenditure is on public buildings and infrastructure.

John Fingleton, chief executive of the OFT, said: “More than ever, well-functioning markets are crucial to economic growth.

“Aggregates, ready-mix concrete and cement, important in their own right, are also fundamental to the wider construction industry.

“We are concerned that competition is not working well in these sectors, with underlying features of the market giving rise to persistent concerns.

“Lack of effective competition not only affects the public sector and business customers but ultimately leads to higher prices for consumers too.”

It is feared that, under current conditions, smaller firms are being squeezed out, the OFT warned.

The watchdog also expressed concern that major firms have been engaged in multiple contacts and information exchanges, alongside asset swaps.

Such practices could “prevent, restrict of distort competition” the OFT warned.