The latest survey of business confidence from one of Britain’s biggest manufacturing exporters shows a strong performance but concerns for the future remain.

The second quarter survey of members of the Chemical Industries Association sees the chemical industry showing an eighth successive quarter of growth – however this performance is not expected to continue into the third quarter of 2022. Fifty chemical businesses, ranging from multi-nationals to SMEs located across the UK expect new orders, exports, and domestic sales to fall in the third quarter of the year as inflationary pressure on both households and businesses begins to erode demand.

The Association’s Chief Executive, Steve Elliott said: “I am encouraged to see that despite the persistent rises in energy, raw material, transportation, and labour costs, as well as a myriad of logistical challenges – the industry continued to grow in the second quarter of 2022. However, it is important to focus on the future. Our membership is extremely concerned about the next few months and the impact that could have on long term investment. For example, we have been working with massive increases to our input prices for nearly a year now; previously such a problem would right itself after a very short period of time. The robust demand by customer industries for what our companies make has helped us deal with this. However, as consumer inflation approaches double digits and with producer inflation being at twice that level, orders from customers are beginning to reduce. Some of these challenges are global in nature, but there are measures that can be taken by a new Government to boost competitiveness and ease energy costs, such as action to remove the non-wholesale cost from industrial energy bills as well as preparing as best as we can to minimise any threat of energy supply disruption later in the year”.

Highlighting the survey findings, the Association’s Head of Economics, Tom Warren said: “Energy costs, the cost of labour, and raw material costs and shortages continue to be the four largest challenges facing the chemical industry. Concerningly, all four challenges are felt by respondents to be worsening. Indeed, as inflation in the UK continues to rise, in June rising to 9.4%, a forty-year high, each of these challenges are being further compounded. The chemical industry needs this to be addressed to reduce the burdens facing the industry going into Q3”.

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For more information or to interview Steve Elliott, please get in touch - Simon Marsh at MarshsS@cia.org.uk or 07951 389197.

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