UK chemicals sales to grow in Q2 but margins continue to fall

LONDON (ICIS)–The UK chemical sector expects sales to continue to grow in the second quarter, building on seven successive quarters of expansion, but margins are under pressure, according to the country’s trade body Chemical Industries Association (CIA).

“In what has been regarded by some as a ‘brutal time to do business’, due to the volatile economic climate, the UK chemical sector remains relatively optimistic in the short term,” CIA said.

“However, with cost pressures, shortages and the ongoing crisis in Ukraine, the longer-term outlook is less optimistic,” it added.

Latest results of a regular business survey underscore the sector’s resilience, the CIA said, showing sales growth for most respondents in the first quarter, with strong growth in the export and domestic markets driving up production.

More than 90% of respondents reported increases in raw material and energy prices, however, and over 85% reported increases in the cost of importing and exporting.

There was a high level of cost pass-through, but margins continued to fall, the CIA added.

“Yet again our industry has demonstrated an extraordinary performance in arduous times, with energy prices and raw material costs rising steeply and showing little sign of easing,” said the CIA’s CEO, Steve Elliott.

He warned of the sensitivity of the industry to external factors such as Brexit and COVID-19 impacts and the increasing cost of living squeeze alongside public expenditure constraints.

“We are seeing an increasing resource and competence challenge,” he said.

The CIA has welcomed the potential re-design of UK Reach and moves to address UK power prices hit by indirect carbon costs, but Elliott said the industry needs rapid progress on UK Reach and for UK policy cost elements to be reduced as soon as possible.

Full survey results will be published later, the CIA said.

Survey results for previous quarters are available here.

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