UK tops European rivals in investment stakes

05 June 1996 00:00  [Source: ICB]

Investment in UK chemicals is set to grow at a rate ahead of most European rivals this year. Further growth is expected in 1997 before a cutback in capital in 1998.

Capital spending in the UK chemical industry in 1996 is predicted to reach £2.35bn ($3.52bn), a rise of 14% in real terms compared to £1.92bn in 1995, the first rise since 1991.

FIXED CAPITAL EXPENDITURE BY THE CHEMICAL INDUSTRY IN THE UK (£M)
	Current prices	At constant prices
1994	1872	1638
1995	1992	1684
1996	2350	1920*
1997	2490	1965*
1998	2190	1669*
* estimated

But the UK's Chemical Industries Association's investments report warned that much of the increase was due to postponed investment carried over from 1995. 'We realise this strong upward revision does nothing more than compensate for the shortfall in 1995,' said CIA economist Nick Sturgeon.

According to one analyst, last year's prediction of £2.06bn fell short by 3.6% due to uncertainty in the macro economy and restructuring.

'The slowdown in H2 last year affected the confidence of petrochemical investors but the UK is not as badly affected,' said one.

The investment figures were welcomed by an analyst at James Capel who said: 'There is an upbeat mood in the UK chemical industry at the moment and the prospects are looking better.'

The survey also revealed the shift in chemical investment away from the UK's northwest to the northeast and Scotland.

Teesside, which the government is promoting as a petrochemical hub to rival Antwerp and Rotterdam, is leading the charge helped by increasing capacity from the CATS (Central Area Transition System) gas pipeline system.

But the 79 companies who responded to the survey said they could see investment moving from the UK toward Southeast Asia and the Middle East.

A flexible and cheap labour force was an asset, they said, but environmental legislation, landfill taxes, planning problems, utility costs and expensive transport costs were constraining companies' investment intentions.

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