Select Committee on Northern Ireland Affairs Minutes of Evidence

Examination of Witnesses (Questions 160 - 179)



  160. What I wanted to establish is that your focus is not merely Northern Ireland.
  (Mr Fidgett) No. Nor is my focus purely aggregates; it covers all minerals across the UK.

Mr McGrady

  161. You've almost convinced me that it is beneficial to the environment to have a proliferation of quarries but not quite, yet. A global question: can you very succinctly give us your assessment of the aggregates industry's value to the Northern Ireland economy in terms of its costs and benefits?
  (Mr Smyth) There is obviously a direct benefit in terms of the employment it creates, much of it largely in rural areas, many of which are areas of high unemployment. Obviously it is an essential industry in the development of Northern Ireland's economy in terms of construction, housing, roads and so on as well. Obviously there are disbenefits in terms of environmental costs. We certainly believe that most of those environmental costs have local externalities, being controlled by the existing planning and environment regime, be it noise, dust, transport movement, planning and land restoration, land amenity and so on.

  162. Mr. Smyth is looking at you, Mr. Clarke. I am not.
  (Mr Clarke) Great play was made about moving on and recycling materials. I want to know where we get these recycled materials from because they just do not exist in Northern Ireland. Basically we have a rural community; there is one major city where a little recycling goes on. It does happen. A contractor will bring his mobile crusher onto a site and use the waste product if it is there. A landfill tax motivates him to do that. In addition, he does not have to buy his aggregates: there is enough motivation there promoting him to do so. Anything that can be recycled is being recycled. But there are vast areas of the Province—probably 75 per cent of it—where there is nothing to recycle. These are basic commodities that are essential requirements if we are to continue to maintain and improve our infrastructure.
  (Mr Fidgett) There was much talk earlier about the role of recycling, which is something that the industry generally supports. Primary aggregate producers are also secondary aggregate recyclers in terms of construction and demolition waste. Ultimately, however, those can only contribute to overall supply and there will always be a need for primary production. That production is not an end in itself; it is required in the need for investment in capital infrastructure whatever that may be—roads, houses, schools, factories. Those needs drive the need for the materials to construct those projects, whether recycled or primary materials. That is, so to speak, a hidden benefit to aggregate production. It is not something that we can do without.
  (Mr Smyth) May I add a final supplement to that?


  163. Yes; you have the plane to catch, not us.
  (Mr Smyth) In addition, the export industry is often important, especially from the added value aspect. We know of companies in County Antrim, County Tyrone and County Londonderry 34-40 per cent of whose higher added value product is actually sold in the Republic of Ireland. So jobs are always being created on the back of the export market.

Mr Barnes

  164. You said that there is a significant movement of quarry products between the two jurisdictions, the Republic of Ireland and Northern Ireland. Can you tell us how much of aggregates and value added products are currently moving between Northern Ireland and the Republic and the Republic and Northern Ireland?
  (Mr Smyth) We do not have the actual figures. All I can say based on evidence from our members that there are considerable quantities. An example is one company that produces paving materials: 37 per cent relies on the Republic of Ireland.
  (Mr Clarke) A lot of quarry products—not the raw virgin materials but the added value products such as blocks and concrete, especially cross border and perhaps three million roof tiles—go south from the north. There are vast quantities of pre-cast flooring products from at least half a dozen manufacturers of which I personally know. This is extensive; in fact, the IDB has promoted it. Its report of only last week stated that it had given a concrete pipe manufacture £½m to promote the production of his product in order to sell it in the south of Ireland. It is common practice. For example, I have a plant in Strabane, 50 per cent of whose production goes into Donegal. That is quite common along that whole border area. I am familiar with concrete and blocks but I know that asphalt black top is also going from Coleraine to Donegal. It is going from various producers around the border areas. The tiger economy of the Republic has sucked in vast quantities of imports and the Northern Ireland producers have become very dependent on them.

  165. So, do you have information from both directions?
  (Mr Clarke) Very little comes from the South to the North at present. There has been a slight movement lately, basically because of the currency. Sterling has become so much more attractive and there would be a modest return of product from south to north, but it is infinitesimal by comparison with what is going in the other direction.


  166. That is because of the relative value of the pound, is it not?
  (Mr Clarke) That is correct.

  167. And because of the competitiveness and efficiency of the industry in the north?
  (Mr Clarke) Indeed.

  168. Do you judge it as being more efficient and competitive than its southern counterparts?
  (Mr Clarke) Generally, yes. There are so many producers in the north. We have, disproportionately, 10 per cent of the UK quarries production. We also have the highest per capita consumption of cement in Europe.

  169. On the island?
  (Mr Clarke) In Northern Ireland.

  170. Higher than in the Republic?
  (Mr Clarke) Yes.

  171. Is that per head or -
  (Mr Clarke) Yes, per head of the population, we use more cement than any part of Europe.

  172. Well, I suppose you could argue that a relatively small tax wouldn't have that great an effect.
  (Mr Clarke) It is not a relatively small tax. May I give you an example of the plant that we operate as a company in Strabane, which will cover a fair number of other points that you may wish to raise later. The plant is situated within one mile of the border, on the northern side. We produce 45,000 metres of concrete and two and a half million blocks. The turnover for that is £2.3 million of which the Republic takes £1.2 million and the north £1.1 million. The employment at the plant is 30 people. We will use 144,500 tonnes of aggregate. Quarry tax will cost us £231,000. The profit for that unit this year was estimated at £53,000, so that is a severe impact.

  173. On a turnover of how much?
  (Mr Clarke) On a turnover in that location of £2.3 million.

  174. That is a profit of £53,000?
  (Mr Clarke) The profit is 2.3 per cent and that would not be unusual in our industry. We are in blocks and concrete a very low-margin product. If one takes the tax in terms of concrete, for the aggregate the increase is £3.36 over £8.06—which is a 43 per cent increase in our aggregate costs. That will translate into a 9 per cent increase on our average selling price, so we will have to recover 9 per cent to stand still. In blocks it is even worse because there are 20 tonnes of aggregate in 1,000 blocks that will cost us £32. The current cost of the aggregates in that unit is £66, so they will go up by 48 per cent. In terms of the selling place, the cost rise of £32 over £268 is 12 per cent., so I need 12 per cent more from the market to stand still. We are already maximising the price that we can get in the market so we cannot go for a 12 per cent increase. So what will I do? I have a simple solution: I will move my plant one mile across the border, and then buy my aggregates without quarry tax. I will then retain my market and sell them back into the north of Ireland and shift 30 jobs out of the UK economy into the Republic of Ireland economy.

  175. I am glad that I taunted you into this answer. Are you able to let us have the statistics that you have read out?
  (Mr Clarke) Yes, certainly.

  176. Thank you very much, Mr. Clarke.
  (Mr Fidgett) May I comment further? There was an earlier reference to aggregates tax in other countries with a land border and Sweden, Denmark and other countries were mentioned. The level of tax in those countries is of a completely different order. In Denmark, it is 3 kroner, which is equivalent to 25p. In Sweden—

  177. But there is no land border between Denmark and Sweden, is there? That is a rather bad example. The land border is between Jutland and Germany, so mainland Denmark and Germany is the comparison to make.
  (Mr Fidgett) Sure. Well, it is between other European countries with a land border with another European country.

  178. But you began with rather a bad example.
  (Mr Fidgett) Well, perhaps that is why they are the only countries to have aggregates taxes, and they tend to be on individual products, for example, sand and gravel, because there is very little of these left and they want to a shift to another material. Thirty-six pence per tonne in Sweden and 6p per tonne in Holland. So the scale is completely different in terms of the effects we are talking about today.

  Chairman: Thank you very much.

Mr Barnes

  179. You said that there was a growing export market in the Republic of Ireland, especially for higher added value products, and that you saw that also as being of great potential. What information do you have on it, and is this growing export market tied in with the point about the relationship between the two currencies. Is the growth consistent with that?
  (Mr Smyth) The growth is almost against the currency trend because the companies in Northern Ireland are struggling against the very strong pound and a weak euro. Perhaps part of the reason is that companies' margins are under pressure. Part of the reason for the growth is that we have a tiger economy in the Republic of Ireland in recent years where there has been strong growth, especially in construction. There are some signs this year, especially in the housing market, that this is slowing down rapidly. A survey released yesterday on the Northern Ireland housing market by the Construction Employers Federation indicated a very rapid slowdown in Northern Ireland. The evidence coming from our members who have been giving us exports information. There are also employment figures. I can quote from 1997 to 1998. Figures have been quoted previously but these are SIC code 92 figures on the manufacture of articles of concrete, plaster and cement. The figures stated that employment has increased by more than 200, from 2,900 to a little over 3,200. Our view is of a general trend in which export markets have been good although margins have been tight because of the strong pound.

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