Major UK manufacturing industry struggles as business climate and government policy bites

The chemical industry – one of Britain’s biggest manufacturing exporters and an industry that has shown real strength during the pandemic - has seen a sharp decline in sales in the last quarter of 2022. Over 53% of respondents to the CIA’s business survey reported a fall in exports to the European Union in the final quarter of 2022 while 50% experienced falling demand from the domestic and non-EU market.

The survey carried out by the Chemical Industries Association, demonstrates not only the significant challenge of the business climate but also the adverse impact of Government policy.  Chief Executive of Association, Steve Elliott said “We knew we were heading for challenging times, but the extent of contraction is worse than feared. As an industry we stand ready to deliver growth and deliver net zero for the UK, but we cannot do that while the policy-framework kills off any incentive for manufacturing investment in our country. When a typical UK chemical business not only has to report on 17 different climate change measures, before even trying to compete with a far more attractive US investment climate, driven by the Inflation Reduction Act,  why would companies want to place money into the UK?  Chemical businesses are committed to net zero – our staff and our customers rightly demand this, as does society – and many of our companies make the raw materials that will help deliver that net zero ambition, but to expect them to do so when their hands are tied behind their backs is simply unrealistic.  

On a positive note, it is good to see that members are expecting some upturn in the economic climate later in 2023,  so all the more reason to help chemical businesses grab those future opportunities by establishing a far more competitive investment climate and simplifying an often tortuous policy and regulatory framework”. 

Commenting on the survey results, the Association’s Head of Economic, Tom Warren said: “The fact that more CIA members reported a fall in sales in between the third and fourth quarter of 2022 than did between the first and second quarter of 2020, which was the height of the pandemic, shows how challenging the end of last year was for chemical manufacturers. Action is needed from Government in 2023 to convince international investors that the UK really is a place to do business“

ENDS

NOTES 

For more information or to interview Steve Elliott, please get in touch - Simon Marsh at MarshsS@cia.org.uk or 07951 389197.

• The CIA’s Q4 Business Survey was completed by 45 chemical companies who have operations right across the UK and encompass, small, mid-size and large corporate businesses.

• The survey focuses on performance in the final quarter of 2022 (October, November and December) and what is expected in the first quarter of 2023 and in 12-months’ time. Aside from the standard questions on industry performance and the challenges faced by the industry, this edition contained questions surrounding the Chancellor’s Spring Budget.

• In February the CIA will publish a comprehensive quarterly economic report that will call on evidence gathered in this survey as well as official data from the Office for National Statistics and other countries statistical offices.

• 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 around 35% more than other manufacturing industries and almost 50% 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 one of the country’s biggest manufacturing exporters, sending goods to the value of more than £54 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.