Chemical and pharmaceutical companies in the UK, the country’s biggest manufacturing exporting sector, have reported a positive start to 2021 according to the latest survey of members of the Chemical Industries Association.
Comparing the first quarter of 2021 to quarter four of last year, more than 80% of companies reported that total sales volumes either increased or stayed the same. Whilst domestic sales largely stayed the same, non-EU exports saw an increase to offset what looks like a temporary fall in EU exports as companies grapple with the new trading arrangements and run down pre-Brexit stock piles.
In other areas of companies’ recent performance, over 40% reported an increase in new orders whilst 34% saw an increase in production levels and 32% growth in capacity utilisation. Employee numbers, R&D spend and capital expenditure largely stayed the same however more companies reported an increase than a decrease.
Steve Elliott, Chief Executive of the Association, said “This performance by chemical businesses and their workforces across the UK represents a superb contribution to the UK economy. The fact that we grew during a pandemic speaks volumes for the hard work of the men and women who work in our member companies.”
Building on this start, the future outlook adds to that positive performance. For the next quarter, 90% expect that total sales will increase or stay the same, with more than 90% of companies in all regions expecting domestic sales, EU exports and rest of the world exports to either increase or stay the same. This should provide great reassurance to many communities as employee numbers, R&D spend and capital expenditure are expected to largely remain consistent. Over the next 12 months as the post-Brexit issues of transportation for exports and imports (85% reporting logistical issues as the biggest problem in doing business) hopefully ease, the positive feeling is even higher. Two thirds of companies expect an increase in new orders and in production levels.
One of the growing threats to the UK economy is inflation. Since the Office for Budget Responsibility’s forecasts, which were published alongside the 3 March Budget, 10 year Government bond yields have almost tripled from 0.3% to 0.8. Although this may sound small and insignificant, for a Government that is expected to borrow a further £234 billion in the financial year 2021/22, equivalent to 10.3% of GDP, this represents billions of pounds in increased debt servicing costs, potentially using up the majority of the £17 billion the Government expects to raise from increasing corporation tax. The increase in bond yield is largely driven by a rise in inflation expectation within the economy. In our survey just under 50% of respondents reported that a rise in inflation was a worry for their business while a further 45% said it was a slight concern."
Elliott continued “There are very real concerns remaining and we are quite rightly not complacent about achievements to date. For any industry to succeed it needs to be able to operate in a well-managed economy. Whilst Government has faced unprecedented challenges we do need a clear plan, with coordinated actions, to return to full growth. In 2021 that means a UK REACH regime that is more supportive of business and an energy and climate change policy framework that enables chemical businesses to maximise their contribution towards the country’s net zero ambition. It also means support for our customer industries who include automotive, aerospace and food & drink.”
He ended “The Chancellor’s Budget was largely welcomed by chemical company Chief Executives and the individual measures he announced around super deduction tax, apprenticeships and free ports will help. I welcome too the publication of Build Back Better and other linked initiatives including net zero opportunities, but we all want to see the overall look of how Government sees the future British economy”.
For more information please contact Simon Marsh at [email protected] or 07951 389197.
- 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 – double that of any other manufacturing industry and triple that of any part of the UK economy.
- Nearly half a million people are employed in the sector or have roles that are dependent on the sector. Chemical workers typically earn 35% more than other manufacturing industries and 54% 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 biggest manufacturing exporter, sending goods to the value of more than £57 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.