UK chemicals makers list ‘weakening demand’ as main challenge

London – After a challenging end to 2022 and a slightly better start to 2023, the second quarter “brought additional strain” to UK chemicals producers, the Chemical Industries Association (CIA) has reported.

Citing its latest survey of member companies, CIA said the three months to 30 June saw sales contractions, decreases in input and energy costs from the previous quarter, but also falling output prices.

“The consensus is that the third quarter will not differ significantly from the second one, but almost a third of respondents expect further contractions in sales,” said CIA chief executive Steve Elliott.

There was some positive feedback regarding supply chains, with around 30% of respondents expecting decreases in input and energy costs – countered, though, by concerns over falling output prices and margins.

Supply chains continued to ease as 42% of respondents saw the cost of raw materials decrease, and 47% noticed energy prices also going down, according to the CIA.

“Nevertheless, output prices also fell, coupled with low sales, harmed margins, which decreased by over 50% of respondents,” the London-based association added.

There was optimism over prospects for the next 12 months, with expected improvement in the current business environment, dominated by “inflation, intricate geopolitics, tight monetary policy, lack of government action, and weak demand.”

The CIA’s latest quarterly survey shows that 58% of UK chemicals makers see ‘weakening demand’ as their main current challenge – with ‘labour cost increases’ and ‘energy prices increases’ ranked second and third respectively.

“Weakening demand and the issues related to the workforce are expected to worsen, whilst raw materials related challenges and energy ones to remain unchanged or get marginally improve,” noted Elliott.

Looking ahead to the third quarter of 2023, CIA said member companies “are disillusioned as they expect the situation to remain unchanged with contractions in sales, new orders, and production.

“Respondents expect input prices to decrease, thanks to a more favourable global economic situation, but the same trend is also expected from output prices as demand continues to fall.”

Concluding on a brighter note, the association said “the outlook is more positive over the next 12 months as sales are expected to pick up and margins to improve.”