Raw materials, energy costs threaten UK chemicals revival

London – UK chemicals and pharmaceuticals manufacturers achieved a 5% increase in exports in the first two months of this year, according to figures from the Chemicals Industries Association.

Growth was led by strong sales to other EU countries, with gains also seen in other world regions, according to the finding of the CIA's latest quarterly survey of the sector.

The performance was about in-line with the UK manufacturing sector as whole, which grew exports by 7% - helped by a weak sterling - CIA economist Nick Sturgeon told a CIA briefing for the chemicals industry journalists.

However, UK chemicals production was up by just 0.4% year-on-year in the first quarter. This compared to 2.2% for pharmaceuticals and 2.5% for UK manufacturing as a whole, Sturgeon explained at the 23 May meeting in London.

But while poor weather had taken "some shine off the confidence of UK manufacturers," Sturgeon added that there had been "some rebound in April [and] export orders are still growing robustly.”

On the other hand, Sturgeon reported weakening domestic demand and forecast that “higher wages and raw materials & energy costs will weigh on margins.”

Nevertheless, Sturgeon forecast steady growth in capital investment over the next 12 months and strengthen 'employment intentions'.

The CIA survey also asked UK chemicals manufacturers to identify the most significant opportunities and challenges for their businesses over the next 12 months.

Compared to a year ago, the highest levels of optimism were around new capacity/products and by expanding markets - in the UK and EU particularly, and to a less extent North America and Asia excluding China.

On the flip side, there is increasing concern about the impact of Brexit uncertainty, higher raw materials & energy costs and lack of production capacity.