A Bright Future Ahead for the UK Chemical Industry?

The University of Nottingham recently hosted a network event for the Chemical Industries Association (yes, they do abbreviate to CIA).  The CIA is a trade body representing its membership of approximately 200 UK chemical and pharmaceutical companies by lobbying and communicating with regulators, policy makers and other trade organisations in the UK and Europe. The CIA is due to publish their growth agenda for the chemical and pharmaceutical sectors in June and is supporting the “Chemistry: We Mean Business” campaign. This post summarises the issues raised and discussed during the event and do not necessarily reflect my personal opinions.

There is much to be positive about the UK’s chemical and pharmaceutical sectors. The UK ranks 10th globally and 4th in Europe as a producer of chemicals and pharmaceuticals and the industry can present a set of impressive figures- annual turnover of nearly £60bn, £20bn value added to the economy, a trade surplus of £6bn and responsible directly and indirectly for 500,000 skilled jobs.  The trade surplus is particularly notable, as the remainder of the UK’s manufacturing industry runs a deficit of £81bn.  Against this backdrop, the CIA will soon launch its ambitious agenda for growth, aiming for a doubling of the UK chemical and pharmaceutical sector by 2030.

Yet the industry has its problems, including securing reliable energy and feedstock supplies and an increasingly complicated regulatory framework. Energy is the biggest concern of many chemical using businesses, especially its cost and price volatility.  Given the UK’s drive towards becoming a low carbon economy, energy prices are amongst the highest in the world and risk putting our industry at a competitive disadvantage.  Compensation measures have been put in place to mitigate this problem, but they need to be sufficiently generous and wide-ranging to achieve the benefits they are supposed to bring.

In the medium term, the UK faces an energy “crunch” in the next decade and gas may be crucial as an intermediate measure before renewables or nuclear power come to dominate the future low carbon energy market. As coal, old nuclear and oil power generation is scaled down, gas’ share of power generation may double from 30% to 60%. Shale gas, which has revolutionised the USA’s economy, is poised to become a big driver behind the “dash-for-gas”, and the appetite for it appears stronger in the UK than most of mainland Europe.

Even though the chemical sector has made 35% energy efficiency savings over the past 15-20 years, many of the “low-hanging fruit” have now been picked and further savings will be more costly and disruptive to implement. Now is the time for innovative solutions, particularly in process chemistry and renewable feedstocks, which will require industry and Universities working together. The chemical industry is critical in the development and manufacture of the technologies that will make our society truly sustainable and low carbon.  Rapidly decarbonising our economy risks damaging the very industry sectors needed to achieve our carbon reduction targets.

A strong and robust chemical industry is reliant on its supply chain, in particular the ability to use local sources of chemicals.  Transporting and importing chemicals, particularly on large scales, is expensive and runs into regulatory difficulties. Maintaining a strong UK/European chemical supply chain is important if the industry is to grow. Already certain key chemicals, e.g. chlorine, have only one supplier in the UK, whereas others such as ethylene oxide are absent entirely.  “Onshoring” the supply chain by reinstating the gaps and strengthening the weaker blocks in the chemical “building set” should be a priority for the industry.  Again shale gas may play a key role if it can be used as an indigenous feedstock and energy supply for the UK industry.

Finally, regulation, which is always a bug bear of those working in the chemical industry.  There has been a long-standing perception that EU regulations are enforced more strictly in the UK than in Europe, tipping the balance against our industry.  The range and frequency of audits are on the increase, adding operational costs, and although a single regulatory voice is desirable it is unlikely to be forthcoming.  But regulation is key to societal acceptance.  As such, it is important for the industry to engage constructively with regulators in London and Brussels to re-balance the regulatory playing field.

The CIA is keen to present a positive image of the UK’s chemical and pharmaceutical industries, particularly to policy makers who would tire of listening to a litany of complaints.  The UK has a competitive tax regime with incentives for R&D, such as the recent patent box, and a strong financial sector which is attractive for investors.  Politically, Vince Cable, David Willetts and Michael Fallon are sympathetic to the needs of the science sector and there is general cross-party support of the current industry and manufacturing policy.  Undergraduate admissions in chemistry and chemical engineering are on the up, although work needs to be done to retain young people in the industry.  Perhaps most importantly, recent surveys indicate that the public are more supportive of the chemical industry in the UK than in any other European country.  The next few years may be rocky, but there are plenty of reasons to be optimistic about the future of chemistry in the UK.

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2 Responses to A Bright Future Ahead for the UK Chemical Industry?

  1. Pingback: Fossil fuels are more than just a bad habit | Simple Climate

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