BFBEnergyPaper

Chemicals and chemical productsTOTAL UK EMPLOYMENTThe chemicals industry supports 600,000 jobs in the UKand provides direct employment for 214,000 people. 69The pharmaceutical industry accounts for 72,000 totalemployment (27,000 in research and development) with200,000 more employed indirectly. 70THE STATE OF THE SECTORThe UK chemicals industry is a vital part of the UK economy,accounting for 16 per cent of the UK manufacturingoutput (1.2 per cent of UK GVA), with a turnover of £60billion and is estimated to generate £222 billion of revenuedownstream. 71 Basic chemicals, fertilisers and nitrogencompounds accounted for 1.6 per cent of total UKmanufacturing in 2008. Pharmaceutical products accountedfor 0.7 per cent of UK GVA in 2011 (an output of £10billion). 72 However there has been a recent decline inchemical output, as can be seen in Figure 13.This recent decline can also be seen in the pharmaceuticalindustry, which has suffered a much more dramatic dropsince 2009.Like other industries, the chemical sector have recentlysuffered from a dip in output, in part brought about by theworld recession but also from problems stemming fromhigh energy bills. According to INEOS, the UK has seen 22chemical plant closures since 2009 with no new builds. 77 Inaddition there have been historic concerns about the factthat the UK chemical industry has reduced its investment inresearch and development and instead appears to dependon maintaining existing business rather than generatingnew products. As a result there are fewer new chemicalsbusinesses in the UK. 78THE IMPACT OF HIGH ENERGY BILLSIt has been estimated that the chemical industry consumesabout 22 per cent of total UK industrial energy. As a resultit is unsurprising that high energy costs have already hada very detrimental effect on the chemicals industry. Therehas already been concern about UK companies movingabroad to escape high energy costs (“carbon leakage”), aspointed out by Tyndall Manchester:The pharmaceutical sector makes a greater contributionthan other high-tech industries to the UK and, over thepast decade, has generated an ever-widening trade surplusreaching a little over £6 billion in 2009. 73 In 2008 UK-basedpharmaceutical companies invested nearly £4 billion in theR&D of new medicinal products. 74PROBLEMS FACING THE SECTORDespite some decline in the decades following the SecondWorld War, much of the UK chemicals infrastructure isstill in place and productive. Unfortunately, despite theseapparent strengths, many chemical plants in the UK arereaching the end of their economic life and in recent yearsmany plants have decided to close rather than undergo thecost of refitting. 75 At the same time there is also a decliningnumber of raw resources:“In recent years the dynamics of the industry havechanged… The supply of raw materials is eitherbeing exhausted, or becoming uneconomic. Many UKoperators are already seeing the impact of decliningNorth Sea oil reserves.”The EU andEnergy Policy69, 70 Chemical Industries Association, Science Education: Britain’s nextdeficit?, found at and UK Trade andInvestment figures, found at 71 UKTI, “Chemicals”, see also Dr P. Gilbert, Dr M. Roeder and Dr P. Thornley, TyndallManchester, Can the UK afford (not) to produce chemicals in 2050?, June2013, found at 72 BIS, Industrial Strategy: UK sector analysis, September 2012, p.10, foundat 73 ABPI data, found at 74 The Stockholm Network Expert’s Series, The UK Pharmaceutical Industry:Current challenges and future solutions, January 2009, found at 75, 76 PwC, The future of UK manufacturing, p. 24, found at 77 J. Ratcliffe, Open Letter to Mr Jose Manuel Barroso, found at 78 J. Brophy, The impact of chemicals industry mergers, acquisitions andrestructuring on the UK chemical infrastructure, found at 79 Gilbert, Roeder and Thornley, Tyndall Manchester, Can the UK afford notto produce chemicals in 2050, found at 28