Annex A - Benefits of the Construction Products Directive

The key benefit for manufacturers of construction products which have met harmonised standards is that they would be able to market their products throughout the EEA. Currently, manufacturers wanting to export their products to other European countries need to have their products tested to each country's test standards and pay the associated repeat test fees.

A report⁹ prepared for the European Commission on the effect of harmonisation on intra-Community trade suggests that mandatory and quasi-mandatory certification requirements for construction products in Member States may take up to 3 years to obtain with costs ranging from a few thousand up to hundreds of thousands of euros¹⁰. It goes onto say that typically between 3 and 10 different certification procedures would be needed to trade throughout the whole EU, but that very few companies certify products for other than their home country.

Many construction product manufacturers view the German and French markets as the most difficult to penetrate from a regulatory point of view, and the German market is particularly stringent with respect to fire testing. The new harmonised testing regime will make these markets more accessible to manufacturers in England & Wales if the products meet the new standards. Wider still, products meeting the new European standards could be exported world-wide should they become global standards.

Another benefit would be that manufacturers would be able to have their products tested anywhere within the EEA.

To value the benefits of harmonisation via the CPD is difficult. There will be time and financial savings on repeat testing, although these will be offset to some degree by a higher initial one off cost. The report⁹ prepared for the Commission estimates that the hypothetical¹¹ annual cost saving in testing and certification amounts to some €1-10 million for most of the six construction product groups it considered (anchor bolts, WCs, lightweight composite sandwich panels, curtain walling, windows and reinforcement steel).

The scope for increased trade in construction products is considerable. The total EU market is around €200 billion and intra-Community trade amounts to around €40 billion. (In the UK the construction product market has an annual turnover of £30 billion - i.e. €50 billion - and makes up some 40% of total construction output¹².) In total construction products contribute around 3% of EU GDP, and during 1994-98 trade in construction products grew faster than GDP at an average of 8% per year. The Commission's report suggests that this rapid growth may be a general effect of the internal market and increasing awareness of opportunities with anticipation of the effects of the CPD.

Implementation of the CPD will provide a direct reduction in the trading costs for producers, in other words⁸:

• Reduction in the costs of multiple testing and certification (hypothetical - see footnote 10 - benefit: €200-400 million per year)
• Reduction in the costs of producing multiple product variations to meet different national standards (savings likely to be small but of the order of tens of millions euros per year)
• Reduction in the cost of quality management, overheads, packaging and other trade related costs (estimated at around €100 million per year).

This amounts to a total reduction of about €300-400 million per year.

These savings will be offset to some degree by the higher one off initial testing as outlined below. In addition, these figures obviously apply to the Community as a whole and are not specific to manufacturers in England & Wales alone. However, based on the proportion of the EU population in E&W (14%), it is estimated that the figure for E&W alone would be in excess of €40 million per year.

There will also be trade and competition effects which will benefit consumers and these include⁸:

• Competition effects - increased trade and entry of new competitors forcing companies to reduce prices and increase efficiency (estimated to be €1,000 million per year)
• Trade effects - as customers are able to select from the most economical sources, probably leading to a shift in production towards low cost or high productivity areas (estimated to be €4,000 million per year)
• Restructuring, rationalisation and economies of scale - Weaker firms and less efficient facilities may close and mergers and acquisitions are likely to result. Savings in production costs are estimated to be €5,000 to €10,000 million per year.
• Dynamic long-term effects due to increased RTD (research, testing and development) and innovation - resulting from increased competition and increased size of firms (could be up to €10 billion after 10 years).

All such benefits of the CPD are necessarily long term and need to be compared against the short-term increases arising from additional testing, increased test costs and product re-engineering.

⁹ Effects of Regulation and Technical Harmonisation on the Intra-Community Trade in Construction Products. Report prepared for the European Commission by WS Atkins International, September 2000.

¹⁰ Based on rate of exchange: £1 equivalent to €1.66.

¹¹ The ‘hypothetical’ cost of testing and certification is defined as what it would cost the industry if all firms were certified for all Member States.

¹² Construction Products Association, London, www.constrprod.org.uk.

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