Survey shows optimism in UK chemical industry

08 April 2014

In the latest survey of business prospects for the UK’s number one manufacturing exporter – the chemical industry, optimism remains high. Over half of the companies expect sales to increase and there is a renewed appetite for investment. The survey was carried out in March by the industry’s trade body, the Chemical Industries Association.

The percentage of companies expecting sales to increase (55%) is the highest for 2 years, with only 6% predicting a decline. On jobs, a quarter of the companies expect equal numbers, half no change and a quarter a decrease.
There is further good news on R&D expenditure, with almost 90% saying this will hold steady or increase. Projected capital investment plans reflect the buoyant trading expectations: 40% intended to increase spending, 45% to maintain levels, and only 15% planned to lower spending.
As regards planned investment, 39% said this would be used for capacity expansion, 16% for improving raw material and energy efficiency, 13% to raise environmental standards, and 32% for general maintenance and refurbishment.
When asked if planned spending would increase their business rates liability. Fewer than 20% said it would, and in none of these cases had the investment decision been affected.
Steve Elliott, Chief Executive of the Chemical Industries Association said: “This latest set of results shows that business leaders across our sector are optimistic in what remains a very challenging trading environment. The cost and security of energy have been a major barrier to our companies. While we welcome the latest announcements in the Budget, the UK has to continue working harder to compete in a global playing field.”
He continued: “I hope and believe we have turned the corner and as UK chemical investment comes on stream we can again show the world what we can do.”
Meanwhile, a new report from market intelligence provider Key Note says total UK manufacturers’ sales of chemicals grew by 9.9% in 2013, after a contraction of 17.9% in 2012. Basic chemicals and basic pharmaceutical products and pharmaceutical preparations are the two largest sectors within the UK chemical market; together they accounted for over two-thirds of total chemical sales in 2013.
Key Note projects that the UK chemical industry will grow by 2.6% in 2014, followed by a higher growth rate of 3.4% in 2015.
It says the rising cost of electricity and gas in the UK remains one of major threats to UK chemical manufacturers’ profitability, given the intensive use of energy by the sector.

Figures published by the Department for Energy & Climate Change (DECC) showed that, in 2012, prices for UK industry increased by 7.4% for gas, and 3% for electricity. Compared with 2005 levels, gas prices have increased by 38.7%, while electricity prices increased by 49.1%.