Rising costs affect chemicals sector

According to a report published by market intelligence firm Key Note, the rising cost of electricity and gas in the UK in the past few years has been one of the major threats affecting UK chemicals manufacturers’ profitability.

Figures published by the Department for Energy & Climate Change (DECC) showed that, in 2012, annual prices for the UK industrial sector increased by 7.4% for gas, and 3% for electricity, the report claims.

We cannot continue to load costs on to an industry that needs to be internationally competitive

CIA chief executive Steve Elliott

In comparison to 2005, gas prices have increased by 38.7%, while electricity prices have seen an increase in the same period of over 49%.

The chemical industry, which is highly energy-intensive, has one of the largest levels of consumption of electricity among all industrial sectors in the UK, and it relies on natural gas for electricity generation – the cost of which has affected most severely those capable of producing chemicals for use in industries such as pharmaceuticals.

Chief executive of the Chemicals Industry Association (CIA) Steve Elliott said: ”We cannot continue to load costs on to an industry that needs to be internationally competitive and expect substantial growth to be delivered.  Companies will simply relocate and in the process take employment opportunities to other countries – its already happening and I don’t want to see any more of it”.

According to Key Note, total UK manufacturers’ sales of chemicals grew by 9.9% in 2013, after the sector contracted by 17.9% in 2012.

However, the market intelligence firm has predicted the sector will see growth of around 2.5% in 2014, and 3.4% in 2015.

“If we are serious about rebalancing the UK economy in favour of manufacturing then we should be equally serious about recognising and supporting the very industries that help deliver the medicines, cars, planes and houses that we all take for granted,” Elliott added.