The UK chemicals sector is vital to the economy
Alliance of Chemical Associations
The UK chemicals industry is one of the country’s most critical manufacturing pillars – integral not just economically, but socially and strategically.
All goods – used every day, by everyone, everywhere – rely on chemicals in their production processes one way or another. The sector generates £70bn turnover each year, with a GVA of £22bn. It directly employs over 150,000 people, and its supply chain another half a million. Moreover, it makes £7.8bn in business investment each year and contributes £55bn in exports – making it the second-largest manufacturing exporter by value of exported goods.
Delivering growth and anchoring the UK Industrial Strategy
The chemicals industry is integral to the success of the government’s growth mission, providing materials, formulations and technologies used across everything from cars and aircraft to energy infrastructure and utilities; from food, packaging and healthcare to pharmaceuticals, construction and civil engineering; and from cleaning and hygiene to cosmetics and personal care products. A healthy chemicals base multiplies value throughout the economy. Without it, there would be no economy.
More specifically, the government’s Industrial Strategy leans heavily on “foundational” industries, without which its “high-growth” sectors would not succeed. The chemicals industry is a prime example. Advanced manufacturing, life sciences, green energy, defence: all rely on chemicals and their derivative formulations and products. But it is more than that. A strong domestic chemicals sector builds national industrial resilience and security, underpinning the country’s critical national infrastructure. Recent global supply chain shocks have demonstrated how important this is. Equally, many parts of the sector are net exporters, helping deliver the government’s Trade Strategy.
Employment in the industry is distributed across the UK but particularly strong in regional clusters, supporting regional growth. A whole range of employment opportunities are offered, not just on the factory floor, but in R&D, sustainability and AI, as well as many other high-skilled, technical roles. The workforce earns on average 32 per cent more than the rest of manufacturing and around 41 per cent more than the economy-wide average.
What’s more, the industry is a major R&D performer, responsible for 19.7 per cent of all UK R&D spending, at £9.6bn. Importantly, this means the chemicals industry plays a central role in achieving the UK’s net-zero and environmental ambitions, with constant innovation enabling improved sustainability in other sectors through the development of new formulations and technologies, from improved batteries to longer-lasting and more reusable products and packaging.
How can the chemicals sector thrive further?
So, what does the chemicals sector need from government to continue to positively impact and support UK economic growth?
Production costs: The sector faces numerous uncompetitive production costs, not least on energy, which has been especially punishing. Pricing closer to that of international neighbours is vital.
Carbon costs: Both the amount and speed of emissions reductions are crippling competitiveness in an industry that is itself key to delivering net-zero solutions. A more predictable and business-supportive policy framework up to 2030 is essential to compete globally.
Green technologies: Investment and support is needed for the green transition, decarbonisation, and circular-chemistry technologies like hydrogen, carbon capture, and sustainable feedstocks.
Chemical regulation: The sector– especially those downstream users like formulators making adhesives, lubricants, paints or printing inks – face immense challenges under frameworks like UK REACH, CLP and BPR regulation. There is no need for unnecessary and costly UK REACH registration requirements for substances already registered under EU REACH, for instance. Ultimately, a proportionate, clear, consistent, and internationally compatible chemicals regulatory regime will reduce trade friction and compliance costs while maintaining high environmental and health standards.
Business regulations: The cumulative impact of regulation heavily reduces competitiveness. Extended Producer Responsibility for packaging and plastic packaging taxes, energy and carbon reporting and schemes like CCA and CCL, imposition of landfill taxes, as well as changes to business taxes and employment law – to give just a few examples – are all hitting at the same time. It is good to note the Industrial Strategy highlights reducing overall regulatory burden, especially when the EU and other countries are committed to reducing regulation within their own borders.
Skills and training: Support for future skills pipelines – especially in STEM subjects – in schools and universities is required to sustain the current skilled workforce that powers high-value manufacturing.
Innovation and R&D: Greater support for commercialisation of R&D in fine chemicals, formulations, advanced materials and sustainable feedstocks will further create high-value intellectual property and export opportunities.
Exports: Continued support from DBT will help the industry identify and exploit more export opportunities, helping sectors that were historically net exporters, but are not any more, like cosmetic products, to become so again.
Ready to drive future growth
The UK chemicals sector is the strategic backbone of the economy, enabling downstream manufacturing sectors, providing high-quality, skilled jobs, and driving export and innovation. Investment incentives, predictable regulation, skills and training, and support for low-carbon process technologies: all have outsized returns when channelled into chemicals. Bolstering the chemicals industry’s competitiveness would allow it to deliver even greater value to the country in future.
Alliance of Chemical Associations
The Alliance of Chemical Associations (ACA) consists of 14 trade associations representing some 1,400 companies, the majority of which are SMEs. They operate in many sectors of the chemical industry supply chain, from the manufacture and the distribution of chemicals to their use for products such as plastics, paint and cosmetics.
You can find out more about the ACA and its member organisations by clicking on the logos below:
