The Business survey results from one of Britain’s biggest manufacturers have yet again demonstrated the resilience of the UK chemical sector, as it reported its seventh successive quarter of growth – a performance expected to continue into the second quarter of 2022.

In what has been regarded by some as a “brutal time to do business”, due to the volatile economic climate, the UK chemical sector remains relatively optimistic in the short term. However, with cost pressures, shortages and the ongoing crisis in Ukraine, the longer term outlook is less optimistic.

The Chemical Industries Association’s Chief Executive Steve Elliott said: “Yet again our industry has demonstrated an extraordinary performance in arduous times, with energy prices and raw material costs rising steeply and showing little sign of easing. Yet, whilst the UK chemical industry remains resilient, at the same time, it is sensitive to many external challenges that face businesses today. The stresses and strains of Brexit, COVID and the increasing cost of living squeeze – alongside public expenditure constraints – does mean that we are seeing an increasing resource and competence challenge.  Some of these challenges are global in nature, but there are measures that can be taken by Government to boost competitiveness and we are pleased to see the action taken to potentially redesign UK REACH and address UK power prices impacted by indirect carbon costs.  These are positive first steps, but if we are to successfully tackle those longer-term concerns and play our essential part in steering the country through any economic downturn, we need rapid progress on UK REACH and we need all those UK policy cost elements of our increasingly uncompetitive gas, electricity and carbon bills to be reduced as soon as possible”.

Highlighting the survey findings, the Association’s Head of Economics, Tom Warren said: “Although we continue to see strong sales growth, the issue of rising energy prices is felt to be the biggest challenge facing the industry, followed by raw material price increases and labour shortages, and looking ahead, the sentiment is that these will worsen.”

Over 50% of survey respondents reported sales growth in the first quarter of the year, with strong growth in the export and domestic markets driving up production levels. However, this high demand was accompanied by sharp rises in input costs with over 90% of respondents reporting increases in raw material and energy prices, while over 85% reported increases in the cost of importing and exporting. Despite high levels of cost pass through, (as 89% of respondents increased the price of their finished goods) margins continue to fall.

The full results of the survey will be published in our Quarterly Economic Report later this month. To view previous quarters, please visit www.cia.org.uk/Policy/Economics.

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For more information or to interview Steve Elliott, please get in touch - 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.