Most companies in Britain’s £50 billion chemical and
pharmaceutical industry predict they will increase sales and exports in the
next 12 months. The latest survey from the industry’s trade body, the Chemical
Industries Association, shows a confident picture for the rest of 2015 and
beyond. Nearly 60% of companies expect sales and export growth, while almost
50% of businesses will increase capital expenditure and grow employment
numbers.
This good news has been welcomed by Steve Elliott, Chief
Executive of the Association who said “These numbers, in the teeth of fierce
global competition, reflect the hard work of chemical and pharmaceutical
companies and their workforces’ right across the UK”. Elliott also paid tribute
to the level of research and development investment saying “R&D investment
is key to UK growth and the fact that 98% of companies will maintain or grow
their R&D commitment is a sign of confidence these companies – the majority
of which are foreign headquartered – have in the UK”.
Looking at first quarter performance for the year, the
sector is bucking the trend with stable growth compared to the relatively poor
manufacturing growth performance. Almost half of chemical and pharmaceutical
businesses recorded sales and exports growth. There was also stability in terms
of employment, research & development investment and capital expenditure.
The survey also looked at opportunities and threats with companies
seeking to expand their global market access and at the same time as being
concerned by what happens to the sterling exchange rate, the European economy
and energy & raw material prices.
Elliott concluded “We are at the centre of a global market and
it is vital that the UK continues to attract chemical and pharmaceutical
investment. In particular companies are worried about escalating energy and raw
material costs. The new government must tackle this challenge urgently to allow
the strong performance of our sector and its contribution to the UK to
continue.”
ENDS
Notes:
Notes to Editors:
For further comment, please contact Simon Marsh 07951 389197
Chemical Industries Association (CIA) is the organisation that represents chemical and pharmaceutical businesses throughout the UK www.cia.org.uk
Details of the survey
The survey was conducted in April 2015 and completed
responses were received from 40 of the 99 chemical and pharmaceutical CIA
member companies.In future the survey will be conducted during the first
month of every quarter and the results released early in the in second month.
The next survey will be conducted in July 2015 and the results will be released
in early August 2015.
Key results
-
UK
chemical businesses were very positive in their sales outlook for the next
twelve months; the majority of respondents (around 60%) expect sales and
exports to increase while only 5% expect sales and exports to decline. The
remaining businesses expected no change.
However,
not as many chemical businesses expect their margins to increase as a result of
higher sales; 25% expect margins to increase whereas 18% expect margins to
fall. The majority expects their profit margins to stay the same.
Competitive
pressures were identified by 83% of respondents as a reason why they have not
been able to increase their profit margins in the last three months. Currency
movements (49%), energy costs (27%), raw material costs (27%) and a lack of
customer demand (27%) were some of the other reasons.
As
the UK’s foremost exporting sector it is clear that expanding global markets
are important to chemical executives. Expanding markets in Asia (15% of
respondents), Europe (14%) and the United States (10%) were three of the
biggest opportunities identified by chemical executives for their business in
the next twelve months.
As
expected the biggest threats to businesses relate to international
competitiveness. An increase in the value of sterling is seen as the biggest
threat (18%) in the next twelve months. This followed by higher raw material
prices (12%), a shrinking European market (11%), the ability to hire or retain
skilled workers (9%) and higher energy prices (8%).
-
The
industry continues to create new jobs with 44% of chemical businesses expecting
to increase employee numbers in contrast to only 10% that expect to reduce
employee numbers.
-
R&D
investment and capital investment intentions are longer term measures of
business confidence.
-
Research
and development (R&D) helps to create new products and more efficient and
environmentally friendly production processes. Almost a quarter of respondents
expect to increase R&D expenditure over the next year, while 73% expect no
change to their planned R&D expenditure and only 2% expect to reduce expenditure.
-
Capital
investment is needed not only to ensure that current capacity is maintained but
also to expand capacity and introduce new products and processes. Overall
almost half of respondents (44%) expect to increase capital expenditure over
the next year, while 41% expect no changes to their capital investment plans.
Only a minority (15%) expect to reduce capital investment.