UK chemical industry slows down as costs increase

London – The UK’s chemical industry has seen a fall in activity due mainly to rising costs, according to a recent survey by the Chemical Industries Association (CIA). 

The sector is going through “the most challenging times in recent memory of the UK chemical business,” said CEO Steve Elliott, publishing the full results of CIA’s fourth quarter 2021 survey. 

According to Elliot, energy prices increased “by at least 500%” for many companies over the past 12 months, while raw material costs rose by an average 30%.

Furthermore, shipping delays are “showing little sign of easing”, he added.

Despite the slowdown in activities, the industry did report “some growth,” said Elliott without giving further details.

Highlighting the survey findings, CIA’s head of economics, Tom Warren said over 95% of respondents experienced an increase in raw material costs in the fourth quarter.

Of those, 79% expect that raw material costs will continue to rise through the first quarter 2022. 

In addition, 89% of respondents experienced an increase in energy costs in the final quarter of last year and 71% expect them to continue rising through the current quarter. 

Costs for the trade-intensive sector are also escalating, with 74% of respondents reporting that the cost of importing increased in the fourth quarter of 2021. 

Some 67% reported increases in the cost of exporting – a situation not expected to improve in the first quarter of 2022, Warren added.

“The scale and cumulative impact of these rising costs will inevitably put pressure on investment decisions for UK chemical businesses, many of which are headquartered overseas,” said Elliott. 

As a result, the industry official urged the UK government to “act now” to address those costs that are within its control. 

“The coming weeks will confirm if that can be achieved in the regulatory area as we reconsider the current design of UK REACH.

“A similar approach should be taken to address increasingly uncompetitive gas, electricity and carbon costs for one of the UK’s critical manufacturing industries,” he concluded.