Chemical and pharmaceutical companies reported a second successive quarter of expansion at the end of 2020 according to the latest business survey of the Chemical Industries Association (CIA).
In the survey 57% of businesses reported total sales growth and 26% reported no material change. Within this, 84% reported stability or growth in domestic sales and 83% in exports. More specifically, 87% saw growth or stability in EU exports (the industry’s biggest market) and 84% reported a similar outlook for “rest of the world” markets. Finally, over 40% of companies confirmed increases in production levels and new orders.
Reacting to the data, CIA Chief Executive, Steve Elliott said: "the numbers reflected both the criticality of the industry to the economy and broader society in such a challenging environment but also the hard work of chemical businesses and their workforces across the UK. During the pandemic our industry has carried on working, underpinned by collectively agreed and carefully managed safety arrangements, enabling companies and their employees to conduct their business and do their jobs with confidence. With order books relatively strong - despite the disruption of Covid and our exit from the EU - all we ask is that supportive conditions for competitive advanced manufacturing are put in place to allow us to build on our resilient 2020 performance and enable us to play our part throughout 2021 in boosting productivity across the UK and deliver solutions to meet our net zero ambitions.
He continued “Our survey also produced questions about the need to get this country’s future global trading relationships right. As one of the most highly regulated sectors, our industry’s regulatory framework needs to be in close step with that of our key export markets to enable continued and increasing access. Should standards drop - or should there continue to be an approach that does not recognise or efficiently link to the legal standards we met while in the EU (see note 1), then prohibitive costs will mean investment in the UK will fall, undoing much of our strong performance to date. There is a high degree of concern about the cost of energy in the UK. While we are part of the solution to deliver a net zero economy because of the products and technologies we make, a system that sees us pay twice the amount for our electricity as other European countries (see note 3) is an ongoing blocker of opportunity”.
Elliott ended “We are relieved there is an agreement on a future trading relationship with the European Union and I hope that the current freight and logistics challenges faced by chemical companies soon start to ease as businesses and authorities become more familiar with the new trading arrangements. That would leave the remaining and significant challenge of delivering an effective and proportionate REACH regime in the UK, and we look forward to working with the UK Government to deliver an outcome that best addresses health, environmental and commercial concerns.”
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- Back in the late 1990s, chemical businesses in EU member states (including the UK) first developed, with the European Commission and Parliament, an all-embracing regulatory framework ensuring that chemicals would have to be Registered and potentially Evaluated and Authorised under the REACH regulation to enable their placing on the EU market. This regulation is complex and far-reaching, and has involved a decade’s worth of significant investment by chemical companies in generating, sharing and submitting substance-specific data to the European Chemicals Agency (ECHA) in Helsinki. Unfortunately, although the UK and EU were able to agree on a chemicals annex as part of the trade deal, this annex focuses more on the potential for future collaboration and “facilitation of non-confidential information exchanges”. It does not include the possibility of the UK government accessing EU REACH data for the purposes of informing its own future chemicals regulatory regime – UK REACH – despite the fact that UK businesses have been the second largest contributor to that data set, after German chemical companies. Such an outcome leaves UK chemical companies with not only the ongoing need to respond to the requirements of EU REACH if they are to retain their EU market interests, but also to reproduce duplicate data for UK REACH purposes – a potential cost of over £1 billion that will provide very little, if any, additional health or environmental benefit and divert significant amounts of expenditure that could be better spent in future capital and R&D investment.
- Our quarterly survey had responses from 46 businesses and looked at a series of performance and expectation questions.
- Government’s industrial energy prices
- The wider UK chemical industry annually exports over £57 billion of goods while adding £18.3 billion in value to the UK economy. The industry directly employs over 150,000 people, often in the typically poorer regions of the UK, who have an average weekly earning 35% higher than manufacturing and 54% higher than the economy as a whole. The industry has an annual business investment of around £5.9 billion with a further £5.9 billion being spent of R&D, equivalent to 21.9% of total UK business spend.