UK chemicals industry reports growth in “brutal times”

London – the UK chemical sector has performed strongly in the first quarter of 2022, "in what has been regarded by some as a brutal time to do business”, according to the Chemical Industries Association (CIA) chief Steve Elliott.

“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,” said Elliott in a statement 5 May.

With cost pressures, shortages and the ongoing crisis in Ukraine, the association chief said the longer-term outlook for the industry is less optimistic.

The sector, Elliott pointed out, is sensitive to many external challenges, including Brexit, Covid and “the increasing cost of living squeeze.”

Highlighting the findings of CIA’s latest quarterly survey, head of economics Tom Warren said the rising energy prices was 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,” he warned.

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.

High demand was, however, accompanied by sharp rises in input costs with over 90% of respondents reporting increases in raw material and energy prices.

Over 85% also 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 continued to fall, Warren noted.

To address the industry challenges, Elliot called on the government to boost the competitiveness of the industry by rapidly redesigning of the UK REACH and addressing the increasing energy prices.