The Construction Products Association this week wrote to trade and industry secretary Alan Johnson warning of the “serious consequences” that rises in gas prices would have on UK materials companies.
UK manufacturers are paying up to five times more for energy than rivals in Europe.
The association raised the issue of price rigging because there were reports that suppliers were “awash with gas”. Ofgem has already asked the European Commission to investigate claims on this issue.
The CPA called on the government to take immediate action to ensure that UK companies were not at a competitive disadvantage.
Michael Ankers, CPA chief executive, told Johnson that, although construction product manufacturers had weathered the price rises in the past two years, “nothing could have prepared us for what has happened in the last 10 days”.
The CPA said that gas prices increased to unprecedented levels last week and at one point trebled to 170p a therm.
Ankers criticised the government’s claims that industry was being alarmist. He said: “In reaching this conclusion you cannot possibly have taken into account that companies in our industry that have extensive operations in other European countries are typically paying 30-40p a therm for their gas.”
Peter Fordham, cost research associate at cost consultant Davis Langdon, said it was inevitable that the price rises would hit margins and profits of materials companies. He said: “Materials production is energy-intensive so it is likely to have a knock-on effect.”
Analysts at Bridgewell Securities said brick and cement production required most energy use, so quoted companies such as Baggeridge Brick and Hanson were likely to be affected. DTI statistics show that average material prices have risen 2.3% in the past 12 months, whereas cement prices rose 9% and bricks 7% in the year to October.
Pilkington, the UK glass maker, has switched from gas to oil in response to the price increases – and energy has become the second highest cost after labour in the brick industry. “Some companies may even be producing bricks at a loss,” warned Ankers. Last week one UK company with a £3.5m turnover in the wood panel industry said its gas costs increased £400,000.
The CPA wants to know …