UK chemicals makers say growth has ‘almost disappeared’

London – UK chemicals manufacturers have seen a significant slowdown in business “with rising costs and falling demand, putting jobs and future investment at risk,” the Chemical Industries Association (CIA) has reported.

Indeed, the UK’s second largest manufacturing exporting sector “has seen growth almost disappear,” in the third quarter of 2024, the London-based association said 18 Oct.

Based on the findings of its latest quarterly survey of member companies, showing reductions across the board, CIA’s glum assessment is in marked contrast to figures released earlier this year that indicated a return to growth.

 This downturn is particularly concerning, said the CIA,which listed the main challenges for the sector as “weakening demand, uncompetitive energy costs, and rising labour costs.”

 Four out of five UK chemical businesses do not see any short-term improvements to weakening demand for at least the rest of this year and into 2025, the third quarter survey found..

“Companies are receiving less new orders as they are facing strong competition from cheap imports and key markets are continuing to slow,” commented the trade association.

Earlier this year, almost half of chemical companies in the UK reported higher sales, production levels, and capacity utilisation, according to Steve Elliott, chief executive of the CIA.

By contrast, he noted, in the latest business survey, that percentage has fallen to less than 25%, whilst 33% of respondents experienced a decline in these indicators.

“The outlook is tough to say the least,” said Elliot. “This volatility of demand and lack of real recovery is making decision-making extremely challenging, especially with regard to longer-term investment.

“With UK chemical production over 25% below pre-pandemic levels and 26% of businesses reporting lower exports, UK chemical sites of international companies are struggling to compete for investment against other regions.”

These negative trends, continued the industry leader, have resulted in 20% of businesses cutting their business investment compared to the second quarter of 2024.

Elliot went on to describe moves by the UK’s new Labour government to deliver an industrial strategy and accompanying competitive investment climate.

 These, he said, are “much-needed initiatives and we will be doing all we can to ensure that ministers and officials not only recognise the criticality of UK chemical businesses... but take decisive action, through long-term policy stability and competitive funding.”

 Also commenting about the latest results, CIA head of economics Michela Borra stated: “Whilst demand and energy are the two main sources of concern for our sector, developments around labour continue to impact our members.

“Around 13% of responding companies marked skill shortages as their main challenge and during conversations with members it is clear that it is one of areas that requires significant government attention in the upcoming industrial strategy.”