Case Study: Developments in the UK float glass and insulated glass unit (IGU) markets

Float glass is the primary component used in the manufacture of double-glazed windows, accounting for approximately 40% of its total manufacturing cost. The most common finished product is the Insulated Glass Unit (IGU), which consists of two or more panes of float glass separated by a spacer bar and sealed with gas. In 2018, sales of float glass in the UK totalled £0.8bn and the sales of finished IGUs reached £1.2bn. In the same year, the total output of float glass was 5.2m tonnes and the output of IGUs was 11m square metres.

Over the last two decades, a series of horizontal and vertical acquisitions have significantly consolidated both markets, leaving a small number of vertically integrated conglomerates producing both raw float glass and finished IGUs. In 2018, the three largest producers in the float glass market—VetroCorp, Glaston, and SiloGlass—accounted for 4.1m tonnes of total production.

Large integrated firms also dominate the downstream market for finished IGUs. Table 1 shows the market shares of the largest IGU suppliers in 2018.

Table 1 – UK market shares of finished IGU production, 2018

The large multinational manufacturers maintain highly capital-intensive operations. Each owns sand and silica quarries and highly specialized float glass furnaces. Their glass-processing divisions sell part of their raw float glass internally to their downstream IGU assembly plants, while selling the remaining stock to external buyers, including hundreds of small, non-integrated independent IGU assemblers.

There is little physical differentiation between the float glass and standard IGUs produced by different suppliers. In both markets, the major integrated firms possess extensive asymmetric information regarding their competitors' pricing strategies and capacity utilization. This is facilitated by frequent joint venture transactions, logistics-sharing agreements, and publicly accessible environmental and planning registries.

Furthermore, high barriers to entry protect incumbent firms in both stages of production. Establishing a modern float glass furnace requires an estimated capital outlay of up to £110m, and the industry is characterized by significant technical and marketing economies of scale.

In 2019, the Competition and Markets Authority (CMA) launched an investigation into the supply of flat glass and IGUs following complaints about anti-competitive coordination among the large producers. Independent glass fabricators reported that they were being subjected to high wholesale prices for raw float glass, whilst simultaneously competing against very low retail prices set by the same multinational players for finished IGUs.

These independent players alleged that the integrated conglomerates were engaging in vertical margin squeeze—deliberately absorbing negligible or negative margins in the highly competitive IGU market because these losses were cross-subsidized by highly lucrative, collusive supernormal profits in the upstream float glass market. Figures in Table 2 and Table 3 detail the shifts in average revenues and average costs in both sectors between 2016 and 2019.

Table 2 – Float glass: average revenue and average cost per tonne (£)

Table 3 – Insulated Glass Units (IGUs): average revenue and average cost per square metre (£)

Following regulatory intervention in late 2019, Glaston and DuraLite were forced to divest several key regional distribution centres and processing plants to a newly formed independent consortium in order to restore competitive balance to the national landscape. However, structural interdependencies remain highly entrenched.