Office of Fair Trading launches probe into aggregates industry

The Office of Fair Trading watchdog has launched a market study into the sector, which provides the raw materials in products such as asphalt and motor ready-mix concrete which is used on Britain's roads and homes.

There are now five major aggregates firms in the UK market — Aggregate Industries, Tarmac, Cemex, Lafarge and HeidelbergCement — following a wave of deals in the sector.

The watchdog has reviewed five acquisitions since 2004.

Although the OFT is not responding to a specific complaint, its concerns include high barriers to entry, the effect of consolidation on local competition, as well as Government controls over mineral extraction.

The OFT — which is about to embark on a round of talks with the industry — could take enforcement action or launch a full-blown Competition Commission investigation when the study is completed in July next year.

The probe also comes against a backdrop of icy prospects for public spending as Government departments look to squeeze more from stretched budgets.

The watchdog's senior director of infrastructure, Heather Clayton, said: "In the present climate, well-functioning markets are even more important to help spur economic growth."

She added: "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."

In the study the OFT will look at the relationship between the planning system and competition, investment and prices, to consider whether there are any distortions in the market.