CHEMICAL SECTOR GROWTH21st Nov 2014
The UK’s £60 billion chemical sector is fundamental to the growth of manufacturing and is set to grow over 5% this year.
In the latest survey of businesses up and down the UK, carried out for chemical businesses by the industry trade body the Chemical Industries Association, optimism remains high. Over half of the companies expect sales to increase, and are creating a renewed appetite for investment.
The percentage of companies expecting sales to increase topped 55% and is the highest for 2 years, with only 6% predicting a decline. On jobs a quarter of the companies expect to increase numbers, half no change and a quarter a decrease.
Chemical Industries Association’s Steve Elliott said;
“This highly significant move shows great faith in the UK by one of the world’s leading businesses, who I am proud to work with. It is the latest signal from a global company that we can make the UK the place for chemical businesses to invest. Through working with Government across a range of issues, the UK Chemistry Growth Partnership is shaping a successful social, economic and environmental future for our country as chemical and pharmaceutical businesses develop those all-important supply chains”
The chemical sector now:
- Contributes over £70 million everyday to the UK economy
- Spend over £5 billion each year on research and development
- Invest almost £2 billion a year in capital expenditure
- Provide employment for over half a million people in well paid jobs
The activity those numbers generate will be reinforced by the growth in demand from key customer industries such as automotive, aerospace and construction – all of which are helping to boost the country’s manufacturing performance.
The industry is now expected to grow 5% in 2014 due to strong export links to the EU and growing export links to Asia.
Chemical and pharmaceutical companies are the nation’s top manufacturing exporters, and among the top ten in the world, with a £6 billion trade surplus: GlaxoSmithKline alone exported £2.3 billion worth of pharma products from the UK in 2010, and spends more than £40 million a year on chemicals from UK supply chains.
In 2011, chemicals and pharmaceuticals accounted for 12.3% of manufacturing value added, or 1.4% of gross value added in the economy.
While the Chemical Sector is estimated to be worth £120 billion by 2030, the Chemical industries Association (CIA) have highlighted concerns for growth within the European Union.
Chronic lack of competitiveness from the European chemical industry could damage the UK chemical industry due to ‘inflated green taxes’ and ‘high energy costs’.
Jim Ratcliffe – majority owner of Ineos – warns that the European chemical industry is heading in the same direction as the textile sector.
Some 32 of Ineos’s 60 chemical plants are in Europe, but their profits have halved in the past three years while the group’s US profits have tripled. The situation is exacerbated by growing competition from the Middle East and Asia.
Mr Ratcliffe points out that Ineos’s major rival, BASF, in a European market spanning around 200 chemical plants, has also “for the first time ever announced a strategic cutback”.
UK firms are working in conjunction with CEFIC to improve energy efficiency to reduce their own energy consumption and costs.
The two-year ‘Sectoral Platform in Chemicals for Energy Efficiency Excellence’ programme will help companies benefit from existing energy efficiency tools and provide information to combat overspending on unnecessary costs that could be applied to R&D or staffing.
According to the European Chemical Industry Council, SMEs represent 96% of European chemical companies and even though energy costs can represent up to 25% of their total production costs, many small firms don’t see energy efficiency as a priority or are not equipped to set up effective energy management programmes.