By Nicholas Earl
The chemical sector has reported its first quarterly fall in sales since the height of the pandemic, with sales expected to continue declining over a troubling winter.
The latest business survey from the Chemistry Industry Association (CIA) revealed that firms are struggling with persistent supply chain issues delaying orders and inflation eating into margins and consumer prices.
Two in five companies reported a fall in sales during the third quarter alone, according to the report.
Meanwhile, 90 per cent of businesses confirmed that the challenges surrounding labour cost increases has worsened in the past three months.
A large majority reported an increase in their input prices (76 per cent), resulting in higher output prices (81 per cent) putting more pressure on the sector.
The CIA’s chief executive Steve Elliott warned that it was “going to be a tough winter” for the industry and that despite the Energy Bill Relief Scheme, businesses are “far from out of the woods.”
He said: “With inflation sitting at almost 10 per cent and expected to rise in the coming months, the cost-of-living crisis is continuing to dampen demand through the second half of 2022 and we think will do so in the first part of 2023.”
Troubled sector aims to work with Government
Elliott confirmed the CIA would work with the Government over future plans to ease the burden for businesses, and are ready to contribute to its review of the six month support package, which is due to be published in January 20203.
The chemical boss said: “We need though something much more long term if we are to maintain current, and attract new, investment and jobs in to the UK. I am encouraged that if we get through the coming months, then companies in our survey expect sales, production and new orders to be higher in a year’s time than at present, however these forecasts contain a high level of uncertainty.”
Analysing the survey findings, the CIA’s head of economics, Tom Warren added: “This quarter’s survey data displays a marked downturn in performance following eight consecutive quarters of sales growth. Energy costs, raw material costs and shortages, and labour costs remain the top four largest challenges currently faced by the industry.”
Businesses which make chemical products and solutions are linked to 96 per cent of all manufactured goods.
This includes ingredients for food and medicines, paints and coatings for cars and planes, materials for mobile phones and electric vehicle batteries.
It also played a key role in the nation’s response to Covid-19 through its supply of hand sanitiser, PPE and vaccine ingredients.
The chemical industry is also one of the country’s biggest manufacturing exporters, sending £54bn worth of goods to other countries every year.
The CIA’s survey was completed by 54 chemical companies which have operations right across the UK and encompass, small, mid-size and large corporate businesses.
It follows forecasts from data group Squeaky earlier this summer that industry faces a £50bn energy bill to meet its needs next year.
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