As the London summit on the future of energy security kicked off in the capital, a timely and pressing reminder came from one of Britain’s key manufacturing exporters. The Country’s chemical industry reported energy costs reaching 400% higher than in the United States and 150% above the European Union — leaving UK businesses paying 200% more than they did prior to the COVID-19 pandemic.

The First Quarter Business Survey from the Chemical Industries Association (CIA) showed that in Q1, jobs contracted at the quickest rate for two years, with the workforce almost 10% lower than in 2023. The outlook remains uncertain with a third of chemical businesses expected to downsize employment numbers in the next 12-months.

The survey revealed that internationally uncompetitive energy costs are placing UK-based chemical businesses at a significant disadvantage compared to other countries. Recognising the need for a green future and the economic, social and environmental advantages that will come from that, the Association is clear: Net Zero in itself is not the problem, but part of the solution and done right could restore competitive advantage to the UK. A smart route to NetZero can enable the UK chemical industry to regain competitive advantage and support the UK’s strategic goals. The industry needs the right urgent support on energy and carbon costs in the interim to survive and get to that low carbon competitive future.

The Association’s Chief Executive, Steve Elliott said:

 “Across UK manufacturing, the uncompetitive cost of energy has increasingly become a disincentive to investment in this country. Nowhere is this more true, more historically persistent or more damaging than in the chemical industry, where energy can form over 50% of many companies’ cost base. Urgent relief is needed - in terms of cost and policy support - if we are to compete internationally and deliver the net zero solutions that the chemical industry is uniquely equipped to provide.”

Michela Borra, Head of Economics at the Association said:

 “On top of the issues identified in our survey, we are grappling with increased national insurance costs of around £100mn and heightened uncertainty linked to tariff costs initiated by the US, disincentives investment”.

Steve Elliott concluded:

 “Time is running out. Business operates in a geo-political world and our Government has to react to that through, yes the international agenda, but also by ensuring business can get the policy support needed to allow it to help Government in facing those challenges. Policies that lead to disinvestment are not going to achieve that.”

For any further information please contact Simon Marsh at MarshS@cia.org.uk, 07951 389197 or Diana Tamayo at TamayoD@cia.org.uk, 07885831615.

The survey also showed

  • 48% of respondents reported that their business is being negatively impacted by regulators under-performance – main challenges are linked under resourcing leading to long waiting times, and harsh responses.
  • Energy as share of total cost has almost doubled from 2018 to 2024. Taking into account that inflation has driven up other production input prices, this clearly shows that the cost of energy is posing a great challenge for UK chemical manufacturers.

The Chemical industry

  • 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.
  • The Association’s Project 2035 work shows how to turn the current, challenging situation around
  • Our survey was conducted between March 31 and April 11 2025. 39 companies of all sizes from across the UK responded.
  • 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.
  • Roughly 140 thousand people are employed in the sector and nearly half a million have roles that are dependent on the sector. Chemical workers typically earn around 21% more than other manufacturing industries and almost 27% 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 second biggest manufacturing exporters, sending goods to the value of more than £60 billion to other countries. The EU represents our biggest market, but we continue to work closely with Government to inform and secure UK trade deals with other key chemical markets such as India and the USA.

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