This report has two sections. The first is a CIA analysis of government data via the Office for National Statistics (ONS). This section assesses the UK chemical industry’s performance against that of the wider economy and is followed by a look at what challenges lie ahead. The second section presents the results and further analysis of our own Q1 2023 Business Survey. Unless otherwise specified figures are for the chemical industry excluding pharmaceuticals.

It was clear that after a challenging end to 2022, the first quarter of 2023 did not bring substantial relief to chemical businesses as a third of members experienced further contractions in sales. Most respondents experienced a decrease in input and trading costs since the previous quarter, whilst less were the ones that reported a decrease in energy prices. Output prices decreased slower than in the last quarter of 2022. 

The consensus is that the second quarter of the year will not differ significantly from the previous one in terms of demand and supply. Nevertheless, sales to all regions, new orders, and production levels are expected to marginally improve as costs further stabilise. Although decreases in raw material and energy costs are a step in the right direction, they are still significantly higher than pre-pandemic and coupled with the expected further increase in labour costs they suggest a tight year for margins. 

When ranking challenges, energy costs remain the main concern for businesses, a situation that has been constant over the last 18-months, but labour costs are a really close second. Third are raw material costs, followed by skills shortages. The economywide tight labour market conditions are particularly evident in this ranking as the second, fourth, and sixth challenge are linked tothe labour market. Issues regarding the workforce are expected to worsen throughout the year, while the ones concerning inputs in production to improve.


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