The CIA gathers industry insights through a quarterly business survey to advocate for our members’ interests with policy makers, regulators and other stakeholders.
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The CIA is proud to announce the launch of the new Sustainable Health Metrics Tool.
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The chemical and pharmaceutical industry is fundamental to modern society. With an immense variety of products, from vital medicines and foods, the construction of buildings, to transport and leisure, the industry truly does have an impact on virtually every aspect of our daily lives.
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Explore this page: Economic Overview | Insights from Industry | Full Report
The Chemical Industries Association undertakes a quarterly business survey of member companies. The data collected, and official data provided by the Office for National Statistics, is then presented back to members for further analysis. The economic report looks at the topics discussed by members in addition to the economic performance of the prior quarter and forecasts for the future.
The first half of 2025 has been marked by heightened volatility in global markets. While the UK economy showed strong momentum in Q1, the announcement of US tariffs in March created significant disruptions. These measures triggered a sharp slowdown in trade, weakened investor confidence and reversed earlier growth trends, leading to lower economic activity in April and May.
Focusing on chemicals, output contracted by 1.8% in 2024 and is expected to fall by another 1.8% in 2025 amid high energy costs, reduced competitiveness and offshoring. The sector remains under severe pressure with energy-intensive operations losing investment to cheaper regions and international demand weakened by global uncertainty.
Headline inflation rose to 3.6% in June 2025 due to fiscal changes and higher energy prices, with the yearly average expected at 3.2%, above 2024’s 2.5%. Services inflation remains persistent at 4.7%. The Monetary Policy Committee held rates at 4.25% in June but we expect a cut in August due to the impact of weak economic growth and tight fiscal policy on the labour market.
The labour market continues to weaken with unemployment rising to 4.7% in May and vacancies falling for four consecutive months. Average UK pay growth has eased but continues to outpace inflation. Total pay in the chemical sector increased by 3.6% while regular pay increased by 4.3%, resulting in a real-terms pay cut of 0.4% for total pay and 0.3% pay growth for regular pay.
In the first quarter of 2025, the chemical sector experienced a slight improvement in demand, with almost 40% of respondents reporting higher sales compared to Q4 2024. However, this uptick was short-lived as Q2 saw a reversal, with 33% reporting falling sales. Production levels and capacity utilisation contracted in line with lower domestic and international demand while margins fell for 47% of respondents — the lowest margin index in over a year. Employment continued its downward trend for the sixth consecutive quarter, driven by restructuring and weak demand. Input costs remained a significant pressure point, with 39% reporting higher raw material prices and trading costs rising due to US tariffs and fragmented supply chains.
Optimism for Q3 2025 remains subdued. Less than a quarter of respondents expect sales and production to improve while capacity utilisation is expected to contract marginally. Concerns over further reductions in employee numbers persist, with 22% forecasting additional cuts and 30% anticipating margins will deteriorate further. Looking ahead to the next 12 months, expectations are weaker than usual. Slightly more than half of respondents anticipate higher sales but with UK chemical output still 32% below pre-pandemic levels, recovery to previous standards appears distant.
The top challenges identified remain energy costs, weakening demand and rising labour costs, with raw material prices following closely. US tariffs were widely cited as a key risk both directly through higher trading costs and indirectly through global supply chain disruptions and uncertainty. Regulatory burdens were another major concern, with 34% of firms reporting that UK sites spend more time on compliance than international counterparts, leading to lost investment opportunities for 42% of respondents.
On opportunities, respondents highlighted potential gains from specialisation in high-value chemicals, capacity rationalisation and government support measures. However, 70% reported a slowdown in net zero investments both internally and across supply chains, reflecting difficult operating conditions.
Download report for a full analysis of the sector’s performance against the wider economy and further understanding of critical industry challenges. For more information contact CIA Head of Economics, Michela Borra at borram@cia.org.uk
DOWNLOADAt the CIA we undertake a quarterly business survey of our membership to identify arising trends, gather consensus and evaluate industry feel regarding arising issues to communicate with government and the media on operating conditions for chemical manufacturers across the quarter. Results from the business survey are discussed in the quarterly economic report. The data collected, and official data provided by the Office for National Statistics, is presented back to members for further analysis. A comprehensive economic report is then published, looking in detail at the topics discussed by members, in addition to the economic performance of the prior quarter and forecasts for the future.
In the first quarter of 2025, the chemical sector saw a modest uptick in demand, with 39% of respondents reporting higher sales compared to Q4 2024. However, production volumes remained largely unchanged, and the increase in sales did little to boost profitability, with fewer than 30% of businesses reporting an improvement in margins.
The Chemical Industries Association is the organisation representing and advising chemical and pharmaceutical companies located across the UK. Our core membership is a diverse mix of chemical and pharmaceutical companies operating within the UK
