With construction investment running at record levels, the outlook for the cement industry in Great Britain can generally be said to be reasonably encouraging. The full impact of the uncertainty created in the housing market by the Northern Rock affair has yet to be seen and there have also been excess house price increases in many parts of the country if that risk is to unwind. This is likely to lead to some weakness in the housing market, with prices possibly coming under pressure. It would thus not be unreasonable to expect some reduction in housebuilding activity in the months ahead, probably more at the upper end of the market as new home buyers limit their ambitions.
Outside the residential sector, the outlook for the construction industry is encouraging, with the Greater London market alone there being the 2012 Olympic Games in building and the Crossrail rail link that is expected to receive royal assent next summer.
Market leader Lafarge increased its cement sales on the British market by 7.6% in the first half of this year and Cemex has just reported a 14% volume increase for the first nine months. While the underlying outlook remains promising, volume increases for next year are likely to be much more modest.
The proposed sale of Tarmac next year is bound to have some effect on the British cement market, but at this stage it is too early to say exactly what. Tarmac is the smallest of the four cement producers in Britain, but it is the largest aggregates producer by some margin and the third largest ready-mixed concrete producer behind Cemex and HeidelbergCement.