The Economics Of The Brick Cycle and Its Effects on Firm and Industry Structure

Home and Abstract Introduction Brick Demand UK House Construction

The Economics of Brick Production

Increasing Concentration of the Brick Industry II III IV V VI VII VIII IX

Conclusions Brick Industry Other Cyclical industries -Christmas trees

  Increasing market concentration within the UK Brick Industry IX

4.3 Conclusions On Increasing Concentrations

Concentration levels within the industry have risen significantly since the brick industry's beginnings, and have continued to rise since 1950 when CR5 was 42% until 1985 when CR4 was 70%. This rise in concentration has occured for a wide variety of reasons. MES levels however, seem to have played only a moderate part in the non-fletton industry's behaviour. MES levels in the fletton industry on the other hand, represented 18% of the total market in the early 1980's and, as such, do seem to have played a significant effect on concentration levels in this part of the brick industry. They do not however, explain completely the 100% monopoly in this sector or the acquisition of LBC by Hanson Trust.

Short-term fluctuations in brick demand combining with decreasing marginal costs in production have, on the other hand, led to significant rises in concentration levels in both sections of the industry. Thus, the brick industry seems inherently unable to exist in perfect competition, and even in conditions of oligopolistic competion, the cost structures of brick yards made it worthwhile for industry players to eliminate competition by merging. Larger companies, particularly those with outside interests are able to enable cost savings on the process of varrying production levels.

The fact that one of the major barriers of entry to the industry is caused by fluctuating demand, tends to suggest that, with all things considered, sharply fluctuating demand is the major, but not the only cause of increased industrial concentration levels in the brick industry.


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