UK chemical supply chain in the doldrums requiring urgent action from Government to kick-start growth

Phil Black - PII Editor 28/08/2024

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The Chemical Business Association (CBA), the voice of the chemical supply chain, has released results from the latest quarterly supply chain survey.

Results, which are for the second quarter of 2024, show a decrease in optimism that was evident in Q1, with only 22% of respondents reporting improvements in their order books over the previous 3 months, compared with the 31% seen in Q1. This is, however, still a 7% increase on respondents from the same period in 2023, which saw only 15% reporting better order books.

Similar viewpoints are revealed across both current and future sales trends. 34% of respondents are reporting that sales are worse compared to Q1, where only 23% claimed current sales were worse when compared to the previous quarter. Regardless of this downturn, the current results are still a marked improvement on Q2 2023, which saw 46% reporting worsening sales.

Despite the results relating to order books and current sales, nearly half (47%) of respondents are expecting future sales to remain stable, an increase of 7% from Q1 2024. Whilst there is a 9% downturn in respondents expecting future sales to be better since the previous survey, there is no significant increase in those expecting them to worsen.

When considering sales margins, respondents reported a decline across both current and future margins. Only 5% of Q2 2024 respondents reported current margins are better than the previous three months, a large downturn from the 21% who reported so both in the previous quarter, and the same period in 2023. Despite this, and the 18% increase in those reporting worse margins since the previous quarter to 37%, the majority of respondents (59%) are reporting stable sales margins.

This trend continues, with 68% of respondents predicting future sales margins will remain stable, and, whilst there is an 9% increase to 27% of those expecting future margins to worsen, this is still an improvement from the same period in 2023, where 36% said the same.

When asked about employment numbers covering the upcoming quarter, the most recent survey shows a shift in responses from the previous survey. 12% expect lower employment levels over the coming months, a noticeable increase from 6% in both Q1 2024 and the same period in 2023. Whilst this may seem a negative development, 6% also expect employment figures to be higher, cancelling out the aforementioned downturn. The vast majority of respondents (68%) expect figures to remain stable.

When asked about logistics issues relating to imports or exports, most responses were consistent with the previous survey, with escalating shipping costs (68%), EU road haulage capacity (15%) and Red Sea/Suez Canal disruption (66%) remaining the same since Q1.

In the case of escalating shipping costs in particular, numbers have increased significantly since the same period in 2023, where only 28% of respondents reported the same. This trend continues across numerous supply chain issues, with respondents also increasingly reporting the ocean freight container shortage to be an issue. The most recent survey is 47%, up from 24% in Q1 and a very marked upsurge from 5% in Q2 2023. There is also an increase in those reporting on ‘other’ disruptions not outlined explicitly in the survey. Some highlighted sourcing bulk material in a timely manner, a shortage of bulk liquid haulage capacity in the UK, and continuing UK REACH and a Brexit fallout.

Tim Doggett, Chemical Business Association’s CEO said: “Our latest survey, despite highlighting a degree of stability and the resilience of the chemical supply chain, particularly across employment and sales, also conveys the ongoing need for supply chain-wide advocacy and initiatives to tackle the very real problems members and the wider chemical supply chain are faced with.”

He added: “The increase in those experiencing problems, particularly due to ongoing uncertainty on UK REACH and other Brexit related issues, deserve to be mentioned. We are asking the new government to work with us through the recently established Industrial Strategy Council – alongside requesting their involvement with already established initiatives such as Generation STEAM, P&SH, and more – with the aim of completing the urgent and meaningful action needed to address the problems clearly highlighted throughout the survey. The resolution of these issues, which extend far beyond CBA membership and into wider industry, is of paramount importance in breaking down barriers to opportunity in order to kick-start economic growth in the chemical sector.”