Materials Science

UK chemical businesses showing strong recent trading and positive outlook

In the latest survey of the level of business confidence of chemical and pharmaceutical businesses, respondees reported strong recent growth in sales and exports. This good news has been reflected in a similar positive outlook for 2018, with the economies of China, Europe and the US all growing simultaneously, to the benefit of an export-intensive industry.

The quarterly survey, which is run by the UK’s Chemical Industries Association (CIA), was conducted in January 2018 and asked about performance in Q4 2017 compared with Q3 2017, and expectations for 2018. The survey showed that a balance of 35% of companies grew export sales and 23% more grew overall sales. Looking ahead, the industry is more optimistic than at the time of the last survey in October 2017. A balance of 39% of companies are seeing growth in overall sales and 42% are expecting growth in exports volume.

Steve Elliott, Chief Executive of the Chemical Industries Association, said “The chemical industry is in reasonably optimistic mood, with the economies of China, Europe and the US all growing simultaneously, to the benefit of an export-intensive industry such as ours. However, like many other sectors of the UK economy we are increasingly worried by the ongoing uncertainty with regard to our future relationship with Europe. Minimal disruption to chemicals trade and investment flows would represent a very positive outcome from the negotiations for UK chemical businesses, but there remain many challenges in achieving that outcome”.  

The chemical and pharmaceutical industry adds £18 billion of value to the UK economy every year from total annual turnover of £50 billion. This represents around 11% of the value added by the whole of UK manufacturing. In addition to gross value added, the sector also contributes to the UK economy in its position at the head of many supply chains within manufacturing and its employment of a well remunerated, high-skilled workforce.

Elliott continued “We do see continued strong growth in capital investment (+32%), and while we have growth  in R&D spending (+16%), it has reduced a little since our last survey. There are also reports of jobs growth to help meet growing demand in 2018. Weak sterling and strong European growth is expected to be key drivers for 2018. Expanding markets in Asia and North America are also seen as opportunities in 2018. However we cannot escape Brexit uncertainty, with 48% of companies reporting this as a worry.  The higher oil price and the weak exchange rate have also elevated concerns over rising raw material costs and energy costs – both critical to an energy-intensive manufacturing sector.”