Memorandum by the Construction Products
The Construction Products Association represents
companies that manufacture and supply products for the construction
industry. The industry it represents has an annual turnover in
excess of £30 billion and accounts for some 20 per cent of
UK manufacturing output. Members of the Association include virtually
all the major companies in our industry, many of whom operate
on a global scale, as well as nearly 40 sector specific trade
associations. In this way the CPA provides a single voice for
manufacturers and suppliers of construction products in their
dealings with government and other bodies. A list of the Association's
membership is attached.
The major companies in our industry have considerable
experience of manufacturing in many different countries throughout
the world and they regularly benchmark productivity between the
various plants across their group. On the basis of this, several
companies seriously question whether there is a productivity gap
between UK operations and those in other countries in Europe and
North America. From their experience UK operations are at least
as efficient as elsewhere and they would be pleased to amplify
this to the Committee if it would be helpful.
Having said this, no one in the industry disagrees
with the need to look continually at ways of improving performance
and raising productivity. Unless a company is committed to this
it is becoming increasingly difficult to survive in the highly
competitive international market in which companies increasingly
operate. Following the Government's announcement of its Enterprise
for All agenda in the summer of last year, the Association has
considered with its members a range of ways in which government
can assist the industry and improve its competitiveness, and these
are summarised below.
FACTORS AFFECTING PRODUCTIVITY AND COMPETITIVENESS
There can be no dispute that over the years
successive Governments have increased the burden on business through
additional regulation, increased taxes, or both. Often it is not
so much the measures themselves that impose the burden on business,
but rather the means by which these are required to be implemented.
As a result valuable staff resources are diverted away from improving
the performance of the business into non-value added activities.
There has been a general move towards more family
friendly policies. It must be recognised, however, that the extent
to which these are developed must be consistent with the need
for managers to run their companies efficiently. This can sometimes
be particularly difficult for SMEs, and in developing polices
on issues such as paternity leave and the right to return part
time, there needs to be more flexible implementation and higher
exemption levels so that the burden on businesses most at risk
from these policies is minimised.
The importance of protecting the environment
is widely recognised amongst members of CPA as our industry has
a closer link to the environment through the manufacture and use
of our products than many others. Where environmental regulation
poses an unreasonable burden on business, however, is the time
it often takes to gain approval from bodies such as the Environment
Agency; the need for repeated applications for approval of processes
already widely accepted in mainland Europe; and the inconsistency
in decisions between different parts of the same organisation.
All this occupies valuable management time and expense invariably
without providing an improved environmental solution.
In the areas of health and safety any responsible
employer fully recognises their responsibility to their workforce
and has a good working relationship with the Health and Safety
Executive to secure a safe working environment for all their employees.
Regulation should only be introduced, however, where there is
clear evidence to show that it is needed to protect employees.
Many of the unreasonable burdens imposed on manufacturing industry
in this country originate in Brussels and we would like to see
the Government be far more forceful in resisting such measures.
The Committee may be familiar with a current Directive on Physical
Agents, which has recently been considered by the European Parliament
and where amendments were made to the proposals on workers' exposure
to vibration and noise, which would impose an enormous additional
cost on industry. In neither case can the more stringent measures
introduced by the European Parliament amendment be justified by
clear medical evidence. It is these kinds of measures that run
completely counter to all the efforts of industry to become more
competitive and productive.
The Government has recognised the serious shortcomings
of the Planning System in its recent Green Paper. Delays in the
decision making process, unpredictable outcomes, and a lack of
understanding of business needs are amongst the many failings
of the current system which add costs to business, hindering rather
than assisting efforts to improve competitiveness. Proposals in
the Green Paper are a positive step forward, but in our view still
do not go far enough to ensure that sufficient priority is given
to handling planning applications from industry quickly and efficiently,
and in a way that encourages manufacturing industry that has a
choice where to invest, to identify the UK as their preferred
Planning is also responsible for major delays
in attempts to improve the transport infrastructure of this country
which is so vital if we are to improve our international competitiveness.
The delays associated with reaching a decision on Terminal 5 at
Heathrow are a particularly high profile example, but equally
important to many of our companies are delays in key road projects.
Proposals to take the major decisions on the principle of developments
like Terminal 5 to Parliament is welcomed, but we remain to be
convinced that the Government's proposals in the Green Paper will
significantly reduce the time taken to approve some of the other
infrastructure proposals. Government urgently needs to address
these issues if it really wants to help improve the productivity
and competitiveness of UK industry.
The tax burden on business has undoubtedly increased
over recent years and there are plenty of measures to demonstrate
this. As with regulations, it is often the administrative burden
that is as costly to business as the fiscal measures themselves.
The introduction of a minimum wage even imposes
an administrative burden on companies that pay all their staff
well above this level, and whilst Working Family Tax Credit has
no direct cost implications for companies, it is wholly unreasonable
to place responsibility for administering this on to individual
companies. There are examples in our sector where new payroll
software has had to be introduced for the sake of one employee
who is eligible for WFTC. Government should take full responsibility
for the costs associated with introducing and implementing such
Undoubtedly the most harmful tax measure to
affect industry has been the Climate Change Levy. Government repeatedly
defends its position by stating that the levy is revenue-neutral
to business, but conveniently ignores that this is anything but
revenue-neutral to manufacturing industry. The additional direct
cost to the construction products industry (after taking into
account the rebates available to those in negotiated agreements
and reduced NICs) is estimated to be £80 million per annum.
In addition there are substantial administration costs for those
involved in negotiated agreements. The use of IPPC as a proxy
for those eligible for negotiated agreements has also created
To impose such a measure on manufacturing industry
at a time when it is already in recession seems wholly inconsistent
with the key Government objective of helping industry to improve
its productivity and competitiveness. Whilst we recognise the
levy will not be removed we have strongly urged Government to
extend the opportunity to enter into negotiated agreements to
all in manufacturing. To take advantage of this, companies would
have to enter into binding commitments, to reduce their energy
use, therefore strongly supporting another key government policy.
Such a move would not conflict with our obligations to the EU
and would benefit the remaining parts of the UK sector who are
competing on an uneven playing field with the rest of Europe where
energy taxation is much less of a burden on manufacturing industry.
Transport taxes remain the highest in Europe
and the response of the Government to the fuel protests in the
autumn of 2000 has done little to ease the situation. Transport
is critical for an industry that accounts for the largest volume
of freight moved by road in this country. The recent Treasury
consultation document on "Modernising the Taxation of the
Haulage Industry" merely re-allocates the existing burden
and quite properly proposes to bring lorry operators from outside
the UK within the scope of the new arrangements. The CPA believes
there needs to be a far more fundamental review of all transport
taxes in order to assess their impact on industry competitiveness.
The Aggregates Tax to be introduced in April
will add considerably, not just to the cost of quarry operators,
but also those who use their products in manufacturing processes.
Independent research has shown that this is not a measure that
will benefit the environment in the way the government intended,
and it will lead to a number of companies, particularly SMEs,
going out of business.
HOW GOVERNMENT CAN HELP MANUFACTURING INDUSTRY IMPROVE
ITS PRODUCTIVITY AND COMPETITIVENESS
Skills and Education
Industry is continually disappointed by the
number of people leaving school at 16 without basic skills in
numeracy and literacy. This places a considerable burden on industry
before they can even start to train them in the basic skills needed
to work in manufacturing operations. Government needs to look
at why the school system is failing in such a key way and to provide
financial support and incentives for companies to work in partnership
with local colleges to provide appropriate training in these basic
skills and in job-related skills.
There is a growing concern that the pendulum
has swung too far in encouraging students to stay on for post-16
college education, whereas for some formal training in industry
with structured programmes of day release at college would be
more appropriate. Many of the companies in our industry believe
such a shift in emphasis could have a significant effect on improving
the skills of those they employ and as a direct result the company's
Investment in both new and improved buildings
and plant and equipment can make a significant impact on productivity.
Industry believes more can be done through capital allowances
to encourage companies to make these investments.
Research and Development
The CPA welcomes the Government's proposed extension
of the R & D tax credit to all companies. Whilst the Treasury
has still to announce the conclusions of the recent consultation
exercise on how the tax credit will operate, we urge the introduction
of this measure at the earliest opportunity so that there is a
real incentive to business to invest in R & D in the UK and
make UK manufactured products internationally competitive.
The poor condition of the country's transport
infrastructure was well documented in the recent report by the
Commission on Integrated Transport. If manufacturers in this country
are to be competitive, particularly in an industry like ours,
it is essential that the Government's proposed £180 billion
investment in transport infrastructure actually materialises within
the time frame set.
Secure Home Markets
Government accounts for nearly 40 per cent of
investment in construction. Its investment has, however, been
unpredictable and invariably falls well short of what was anticipated
in its original spending plans. This has discouraged long-term
investment by companies in our industry, and not provided the
secure home base that permits them to train and retain experienced
E-Business provides one of the greatest drivers
to improve productivity and competitiveness in UK manufacturing.
The government has done a great deal to ensure that the UK is
at the forefront of these developments through incentives to businesses,
particularly SMEs, to invest in this new technology and to train
staff. There are still some companies, however, where there needs
to be a greater awareness by those in senior positions to the
opportunities that ICT offers and the fundamental changes to a
company's culture that this often requires. We feel Government
may be able to do more to raise the strategic issues surrounding
this with those at the top of companies.
EFFECTS OF 11 SEPTEMBER
CPA conducts a quarterly State of Trade Survey
of its members. The most recent Survey does not suggest there
has been a dramatic fall in sales in our industry following 11
September. Whilst there was a small balance of firms (-5 per cent)
that saw sales fall in the final quarter of the year compared
with the third quarter, a balance of 61 per cent of firms saw
sales higher in the fourth quarter compared with the same quarter
at the end of 2000. Companies also remain positive (+29 per cent)
that sales will increase in the first quarter of 2002 and a balance
of 51 per cent of firms are forecasting that sales in 2002 as
a whole will be better than in 2001.
The two most recent surveys also asked specific
questions about the effect of the events of 11 September on individual
Have events of 11 September had an effect on
your Business Activity?
|Response on 30 September
||Response on 31 December|
|Yes||78 per cent||85 per cent
|No||22 per cent||15 per cent
As the table shows, the majority of companies in our sector
were affected, and this increased between the September and December
Surveys. The main effect seems to have been a delay to construction
projects rather than for them to have been postponed altogether.
We also asked what effect there had been on other elements
of their business and the results are shown in the next table.
EFFECTS OF 11 SEPTEMBER ON OTHER ELEMENTS OF BUSINESS
||No Change 30/931/12||Small Decrease|
|Significant Decrease 30/931/12
||% Balance 30/931/12|
|Total Order Book||0||4
Whilst the first table shows an increasing proportion of
business being affected by 11 September, this second table shows
that the intensity of concern has diminished between the September
and December surveys. The main concerns still surround business
and consumer confidence.
Finally, the survey also looks at the investment intentions
of companies in the construction products industry.
Comparing the answers to this question in the last three
surveys shows a significantly positive balance of companies intending
to increase their investment in key elements related to competitiveness
and productivity, and these seem to have been largely unaffected
by the events of 11 September.
Manufacturing remains a key part of the UK economy and the
Association welcomed the recent speech by the Secretary of State
for Trade and Industry emphasising this. In the highly competitive
global economy in which all our companies now operate, it is essential
to continually be looking at ways of improving productivity and
competitiveness. We welcome the Trade and Industry Committee's
decision to inquire into the factors affecting this, and hope
that in the recommendations of the review they emphasise particularly
the importance of government and industry working in partnership
to achieve a common goal.
Aggregate Industries plc, Baxi Group Ltd, Blue Circle Industries
PLC, BPB plc, Caradon Plumbing Limited, Corus Group (UK) plc,
CRH plc, Etex Group SA, H+H Celcon Limited, Hanson PLC, IMI plc,
Knauf UK, Lafarge Redland Aggregates Ltd, Marshalls plc, Owens
Corning Alcopor (UK) Ltd, Pilkington PLC, RMC Group plc, Saint-Gobain
plc, Tarmac Groupplus a number of smaller companies.
Access Flooring Association, Association of British Roofing
& Felt Manufacturers, Association of Building Hardware Manufacturers,
Association of Interior Specialists, Bathroom Manufacturers Association,
Brick Development Association, British Aggregates Association,
British Cement Association, British Ceramic Confederation, British
Combustion Equipment Manufacturers Association, British Non-Ferrous
Metals Federation, British Plastics Federation, British Precast
Concrete Federation, British Stone, British Wood Preserving &
Damp Proofing Association, Builders Merchants Federation, Cementitious
Slag Makers Association, Clay Roof Tile Council, Door and Shutter
Manufacturers Association, Eurisol Fibre Cement Manufacturers
Association, Flat Glass Manufacturers Association, Glass &
Glazing Federation, Guild of Architectural Ironmongers, Gypsum
Products Development Association, National Prefabricated Building
Association, Quarry Products Association, Single Ply Roofing Association,
Society of British Gas Industries, Society of British Water and
Wastewater Industries, The Clay Pipe Development Association,
The Lead Sheet Association, The Metal Cladding & Roofing Manufacturers
Association, Timber Trade Federation, UK Steel Association, Waterheater
Manufacturers Association, Wood Panel Industries Federation.