UK chemicals output begins to pick up as inventories fall

Chemicals production levels in the UK are showing signs of improving after a slow start, according to the latest report from the Chemical Industries Association. Inventory reductions by the industry's major customers have triggered the modest rise, it says.

The CIA's May economic bulletin says that UK output in 1998 was 1.6 per cent above the previous year, slightly ahead of the average for western Europe and ahead of the US and Japan. For this year, the association is predicting a further 1 per cent increase in Europe.

In the UK, however, the effects of high exchange rates are likely to keep production levels flat overall, as they pressurise consumer industries. Capital expenditure is predicted to fall 5 per cent this year from the peak level of last year.

Next year, however, will see a 2 per cent rise in the industry's output, as domestic demand strengthens and the growing economic recovery of the Far East continues, the CIA predicts.