Merger plans involving the UK operations of Tarmac and France’s Lafarge have been put under threat after criticism from competition chiefs.
In a market where there are currently only four UK producers of bulk cement, the Competition Commission said it was concerned that a tie-up involving Wolverhampton-based Tarmac would increase the “susceptibility of the market to co-ordination”.
It also highlighted fears over the impact on the markets for rail ballast and the supply of high purity limestone, which is used in reducing emissions from coal-fired power stations.
The Commission is already holding a separate investigation into Britain’s £3.3 billion building materials industry and will now look at ways to address its concerns about the joint venture.
It said that in the supply of bulk cement, which is used in concrete, mortar and rendering, there was evidence that the market was not as competitive as it could be.
Chairman of the inquiry group Roger Witcomb said: “Prices and profit margins haven’t been affected in the way we would have expected following the big falls in the demand for cement in the past few years.”
The two businesses recorded combined sales of £1.8 billion in 2010 and are expected to generate cost savings of at least £60 million a year from the proposed tie-up.
Lafarge entered the UK market in 1987 before acquiring Redland in 1997 and Blue Circle in 2001. It employs 2,800 people in the UK and supplies around 50% of the cement market.
Tarmac is the UK’s largest quarrying company and has been involved in some of the UK’s biggest construction projects including Wembley Stadium, Emirates Stadium, the M1 widening, M25 resurfacing and the London Olympics. It employs 4,500 people in the UK and has a portfolio including 118 quarries, 69 asphalt plants and 180 ready-mixed concrete sites.
The companies have said the combination will create greater value for their customers, given the bigger offer of products and services.
Anglo American, which owns Tarmac, said it would continue to work with the Commission to address the issues raised.