UK chemical output to fall by 2.25% in 2010 - consultants

21 September 2010 16:28  [Source: ICIS news]

LONDON (ICIS)--The UK’s chemical production is expected to fall by 2.25% in 2010 despite overall manufacturing output being forecast to grow by 3.75%, consultants Oxford Economics said on Tuesday.

The reduction was mainly due to weak performances during the first half of 2010 in pharmaceuticals and other specialty sectors, it added.

“Output excluding pharmaceuticals is still forecast to grow but at only 0.5%,” Oxford Economics said.

“Although we expect recovery from now on, chemical production is forecast to rise by only 3.0% in 2011, the sluggishness this year somewhat reducing prospects,” it added.

In addition, the consultants said that overall growth in chemical production was predicted to slip to 2.5% in 2014 and 2.25% by 2020, as new plants in China and the Middle East siphon off any real growth, particularly in basic chemicals.

“Basic chemical output has only just started to recover from the deep fall last year. Some closed plants may never reopen with competition from brand new, more competitive plants outside of Europe intensifying,” Oxford Economics said.

“We now expect [basic chemical] output to grow by 4.0% this year and next, before quickly reverting to below a 1.0% per year trend by 2014,” it added.

In addition Oxford Economics said that chemical investment was set to fall by 18.5% this year, despite a bounce in the second quarter.

“UK firms will continue to invest overseas and there is little incentive for foreign companies to invest here [the UK]. Finance constraints have decreased greatly with the sharp rise in company profitability,” the consultants said.

Chemical prices, which have accelerated recently due to higher energy prices and world demand, were also likely to flatten as strong competitive pressures exerted their influence on the market, it added.

($1 = €0.77)

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By: Franco Capaldo
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