Chemical companies across the UK are continuing to face difficult trading conditions. In the latest survey of member companies of the Chemical Industries Association, over 50 different businesses reported a sixth consecutive quarter of contraction.

Falling sales, production levels, and capacity utilisation featured heavily. However, looking forward, there is a glimmer of hope, with the majority of businesses thinking the worst is over and that new orders and exports are predicted to improve. That said, a more sustained recovery is not anticipated before the end of the year.

The survey – which covered trading conditions in Q4 2023 as well as a forward look - highlighted weakening demand, labour cost increases, and skills shortages as the three main challenges for the industry, with growing concern over freight price increases and shortages. Energy costs were not in the current top three, but they are still a huge concern for the sector, with current prices at double pre-energy crisis levels and internationally uncompetitive.

On the people challenges, Michela Borra, the Association’s Economist, said, “Future expectations of contracting employment and of higher labour costs suggest that retention costs for chemical manufacturers are projected to increase as the sector continues to be affected by skills shortages.”

Steve Elliott, Chief Executive of the Association, said, “There is some hope, but we must tackle the policy agenda featured in our recently launched manifesto if the country is to retain a thriving chemical industry. Our businesses can do so much for this country in terms of tackling climate change, providing well-paid jobs in regions where they are needed most and boosting UK exports. However, we must improve the policy framework we are asking industry to operate under. It is a major worry that a third of companies in our survey said cost management and survival will shape their approach in 2024. I know we can secure better times, but we really don’t have long to establish confidence in the UK for chemical businesses and their investors”.

NOTES:

For any further information about the survey or to speak to CIA please contact Simon on 07951 389197 or Diana on 07885 831615.

The Association’s survey was carried out at the end of January, with 50 chemical businesses across the UK reporting.

• Businesses who make chemical products and solutions are integral to something like 96% of all manufactured goods.  Whether it is ingredients for food and medicines; paints and coatings for cars and planes or materials for mobile phones and electric vehicle batteries, the chemical industry is truly the “industry of industries” – also playing a critical role in the nation’s response to Covid-19 through its supply of hand sanitiser, PPE and vaccine ingredients.

• Chemical businesses are located throughout the UK, with many of them clustered together in the North East of England, North West of England and Central Scotland.  These factories and laboratories, operated by a highly trained and skilled workforce, make a significant contribution towards the UK’s productivity performance.  

• Roughly 140 thousand people are employed in the sector and nearly half a million have roles that are dependent on the sector. Chemical workers typically earn around 21% more than other manufacturing industries and almost 27% more than the average worker.

• From Runcorn to the Humber Bank; from Teesside to Grangemouth, chemical businesses and their employees right across the country are essential to the Government’s levelling-up agenda.

• We are the country’s second biggest manufacturing exporters, sending goods to the value of more than £60 billion to other countries. The EU represents our most important market, but we continue to work closely with Government to inform and secure UK trade deals with other key chemical markets such as Japan and the USA