13 February 2004

Aggregates Sales decline in Fourth Quarter of 2003

Sales of crushed rock and sand and gravel aggregates declined in the fourth quarter of 2003 and for the year as a whole.

Following a 3% fall in the fourth quarter, crushed rock sales were 2% down for the year. Sand and gravel sales declined by 1% in the final quarter, but by 4% for the year.

Sales of ready-mixed concrete fell by 1% in the final quarter and by 1% for the year, while sales of asphalt declined by 6% in the quarter but the annual volume for 2003 was the same as for 2002.

In total, sales of crushed rock and sand and gravel aggregates fell by 2.5% in 2003, reflecting a number of factors, including:

• A notable decline in demand for sand and gravel and concrete in London and the South East due to the downturn in new commercial construction.
• Slow progress in implementing infrastructure improvements set out in the 10 year Transport plan.
• The steady growth in the use of recycled and secondary materials. These materials have been increasing market share by an average 1% pa since the late 1980s, and now accounts for 24% of the aggregates market.
• The aggregates levy * effect whereby lower quality crushed rock has been subject to some substitution by other (non taxed) excavated materials such as clay and shale.

The outlook for 2004 depends upon two critical factors:

• The extent to which economic activity and confidence improves and the downward cycle of commercial and industrial construction recovers.
• The willingness and ability of Government to ensure that plans for higher investment in infrastructure and public services are implemented with greater urgency.
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  Txt: Aggregates Sales Fourth Quarter 2003 (Feb 2004)

• The QPA has provided detailed evidence to Government highlighting that the overall impact of the aggregates levy has been environmentally perverse, and that Government has yet to identify any clear targets or benchmarks with which to make an environmental assessment of the levy. Following Government’s acknowledgement that the levy has failed in N. Ireland, QPA is calling for an objective and transparentassessment of the levy to be implemented for the rest of the UK.

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Notes to editors

The Quarry Products Association is the principal trade association representing the UK aggregates industry. In England our members produce over 90% of aggregates extracted - sand and gravel and crushed rock as well as other non aggregate minerals such as silica sand, agricultural and industrial lime including limestone, chalk, clay and shale for cement.
1.	The Aggregates Levy was announced in the March 2002 Budget, legislation was included in the 2001 Finance Act, and the Levy of £1.60 per tonne implemented in April 2002. The Levy is planned to generate £385 million per annum, although actual revenue is probably around £350 million per annum. In order to support environmental initiatives and improvements for local communities in quarrying areas, and also to finance recycling initiatives, DEFRA was given £29.3 million in both 2002/3 and 2003/4 to finance the Aggregates Levy Sustainability Fund in England. ALSF funding for local community and environmental improvements is channeled through three national organizations, English Nature, The Countryside Agency and English Heritage and through direct funding allocations to three counties with significant quarrying activity (Derbyshire, Leicestershire and Somerset County Council). These organizations now face substantial cuts in their ALSF allocations next year.
2.	December 2003 Pre-Budget Report, paragraph 7.68: ‘DEFRA has completed a review of the Aggregates Levy Sustainability Fund. This concluded that there are strong economic arguments to support the continuation of the Fund as a targeted intervention to address the environmental costs of aggregates extraction. In its first year, the Fund distributed £29.3 million to help finance over 200 environment, heritage and access projects. The Fund will therefore be continued for a further three years with the current level of funding, with a review to be carried out in the final year. The existing bodies will be used for distributing the Fund for 2004-05 and the option of additional organizations for future years will be considered further.’
3.	Reference to DEFRA report ‘Mid Term Evaluation of the Aggregates Levy Sustainability Fund’ September 2003 (published on December 10 2003).
4.	Prior to Government’s original decision to introduce the Aggregates Levy, the QPA had proposed as extensive package of voluntary and regulatory environmental proposals as a more environmentally effective alternative to the proposed Levy. The QPA proposals were rejected by Government in favour of the Levy. In its decision to significantly reduce the rate of Levy in Northern Ireland in return for an environmental agreement with the industry Government has in effect acknowledged that the original Levy decision was wrong.
5.	The QPA has published a 111 –page report entitled ‘QPA Assessment of the Impacts of the Aggregates Levy’ which is now available. For further information, please see www.qpa.org/new_iss.htm#tax
6.	The QPA report reaches the following conclusions: a. The introduction of the levy as a new environmental tax was accompanied by no detailed environmental objectives, targets, benchmarks nor measurement criteria, other than very general policy aims, an issue which clouds any levy assessment. b. The levy has failed the Government’s own Tests of Good Environmental Taxation. Most critically, these tests state that: “Economic instruments must deliver real environmental gains cost-effectively” and “Environmental policies must not threaten the competitiveness of UK business.” In practice, it is highly questionable if the levy has delivered net environmental gains (this assessment suggests not), it has demonstrably not been cost-effective, it has already damaged the competitiveness of UK business and threatens to inflict further damage. The levy is a bad environmental tax.

 

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