CONFUSION in chemistry
15 Jan 2000
Dire warnings on science policy, the success of Europe and a predicted worldwide slowdown in investment were the bombshells at this year's CIA Business Outlook Conference. Stuart Nathan dived for cover.
`Something is desperately wrong and broken with the British government's science policy.' It's the sort of cry routinely heard from academics bemoaning their lack of funding. But when it comes from the research chief of one of the world's most successful pharmaceutical companies, it's an eye-opener.
Speaking at the Chemical Industry Association's business outlook conference, SmithKline Beecham R&D chairman George Poste laid into the politicians' neglect of what he sees as the most crucial factor in Britain's competitiveness. `Science is marginalised in public policy except when there's a crisis,' he said.
Even when politicians take notice of scientific issues, their tendency to `reduce incredibly complex factors to absurdly simplistic conclusions' merely creates confusion and resentment on both sides, said Poste. And the situation isn't likely to improve after the general election, as `the main political parties' manifesto commitments on science are matched in their vacuous innocence.'
The recent research assessment exercise at English and Welsh chemistry departments - proving grounds for the scientists essential for both the chemical and pharmaceutical industries - are slipping behind their overseas competitors, particularly in the US and Japan, said Poste. He is particularly concerned that the departments can no longer afford the latest analytical equipment. Graduates starting work in industrial laboratories have to undergo `remedial training' lasting from a year to 18 months, so they can use the equipment, acquire the computer skills, and be exposed to the interdisciplinary activities that industrial research demands. `The government is saddling industry with educational costs,' Poste commented, 'and is therefore failing both industry and education.'
The ups and downs of Europe
One thing that is succeeding for all the heavy chemical industry sectors is the membership of the European Union - except, that is, for its employees. According to Michael Littlechild, a partner at accountancy firm KPMG, the single market has helped the chemical industry increase its exports both inside and outside the EU, and their plant capacities. However, most of the companies have had to reduce their cost base by decreasing the size of their workforce.
KPMG has conducted a survey of over 7000 companies in the European chemicals sector, encompassing petrochemicals and plastics, agrochemicals, inorganics, fibres, paints and inks, and dyes and pigments. The results show that Europe has been, in general, good for business, says Littlechild. Since 1985 - when the commission began dismantling the intra-European trade barriers - imports and exports have both increased, price differentials between countries have narrowed, and most respondents believed their costs have fallen.
However, in many cases, the decrease in costs has been forced on companies by the increase in competition. Two-thirds of the companies had reduced their overheads, while many had reduced overhead costs, closed plants reduced prices. Most companies also reported gains in efficiency through investments, mergers and acquisition. But a majority also said that they'd had to reduce their staffing numbers.
Average plant sizes across Europe have also increased, said Littlechild. Ethylene plants had an average capacity of 328million tpa in 1985; this has grown steadily, reaching 463million tpa by 1995. Propylene plants have also grown, although neither as steadily or as steeply: the average size in 1985 was 205million tpa, falling to a low of 193million tpa in the cyclical trough of 1989, but recovering to 221million tpa by 1995.
Looking west... and forward
Workforces are also shrinking across the Atlantic, commented Fred Webber. president of the US Chemical Manufacturers Association. `The industry is now down about 90 000 employees from its 1981 peak, a decline of about 8 per cent,' he commented; the US industry now employs just over a million people. The inorganic sector has seen the biggest losses, shedding almost a third of its workforce; by contrast, pharmaceutical manufacturers now have 28 per cent more employees than 15 years ago.'
US companies have seen plant and equipment spending burgeon from $11.4billion in 1982 to $30.9billion in 1994, said Webber. The CMA estimates last year's spending reached $33.5billion. This encompasses new capacity and replacement of obsolete equipment, but around 8 per cent of the investment was directed at environmental protection and pollution control, said Webber, with smaller companies targeting even more of their spending at this field.
The CMA forecasts steady growth in spending on both R&D and plant and equipment in the coming year, although the increases will not be as steep as in previous years. R&D spending is forecast to grow by 4 per cent in companies with annual sales below a billion dollars, and by 3 per cent in the higher-turnover category. Similarly, smaller companies expect to spend 5 per cent more on plant and equipment, while their larger counterparts predict a 3.5 per cent rise.
The picture is similar in Europe, with investment set to slow considerably, commented ICI's chief economist, Richard Freeman. Expanding on his recent speech to the European Chemical Industry Council (see PE, Jan 97, p12), Freeman predicted investment slowdowns in every European country except Germany, `but investment there was flat anyway.' UK companies will be the most reluctant to invest, he prophesied, with last year's 15 per cent growth in spending dwindling to barely 3 per cent in 1997.
