Introduction: Why the UK Chemical Industry Still Matters
The UK chemical industry, long a cornerstone of the nation’s manufacturing and scientific prowess, now finds itself at a critical juncture. The pressures of global competition, an evolving energy landscape, and the urgent need for decarbonisation are converging to redefine what success looks like. A recent report produced by S&P Global for the Chemical Industries Association (CIA) provides a candid yet constructive view of the industry’s trajectory towards 2035. Drawing on evidence from a wide array of economic, industrial and environmental data, it sets out not only where the sector is heading but what must be done to secure its future.
Despite the challenges, the report paints a picture of an industry whose importance extends well beyond financial statistics. The chemicals sector is deeply woven into the UK’s broader industrial and economic fabric, providing essential inputs to everything from pharmaceuticals and agriculture to aerospace and renewable energy. It remains a vital enabler of national resilience and energy transition goals. However, without timely and targeted intervention, the current path risks leading the UK chemical industry into long-term decline.
The Chemical Sector’s Value: More Than Meets the Eye
In 2022, the UK chemical industry recorded a turnover of £70 billion, contributing around 1.2% to the national GDP. It is the second-largest export sector in the country, accounting for 15% of exports and 12% of imports. The industry directly employs over 130,000 people and supports another 500,000 through its supply chains. What is especially noteworthy is that many of these jobs are located outside the capital, helping to drive regional economic balance, and they typically offer salaries well above the manufacturing average.
This sector’s role is even more pronounced when viewed through the lens of national priorities. The energy transition, for instance, depends heavily on chemical innovation—whether in the development of advanced materials for wind turbine blades and solar panels, or in producing the essential components for battery technologies, sustainable aviation fuels, and low-carbon ammonia. The sector also supports key national infrastructure in defence, health, water treatment and energy, reinforcing the UK’s ability to withstand shocks and secure strategic autonomy.
Challenges and a Gradual Decline
Yet for all its importance, the UK chemical industry has been on a downward trajectory for the better part of two decades. This decline is reflected in reduced domestic production capacity, plant closures, and a shrinking R&D footprint relative to global leaders. The ownership landscape has become increasingly international, limiting national influence over strategic decisions. Compared to countries such as China, the United States, and Germany, the UK’s chemical R&D spending is modest and increasingly uncompetitive.
At a global level, the chemical industry is enduring a cyclical downturn, with profitability particularly strained in commodity chemicals due to overcapacity and high energy prices. Ethylene margins—a key benchmark—are now virtually zero in Europe and Asia. Meanwhile, specialty chemicals show more resilience but still suffer from slow growth in Western Europe. Geopolitical uncertainty, volatile input costs, and a lack of long-term policy clarity are exacerbating these pressures, and the UK is feeling the effects more acutely than many of its peers due to its structural disadvantages in feedstock and energy costs.
Scenarios for the Future: A Risk of Strategic Drift
The report sets out four potential future scenarios, each shaped by combinations of input cost and demand dynamics. The most favourable scenario features low costs and high demand, supporting robust domestic industry and export potential. The most unfavourable—worryingly, the one the UK is currently drifting towards—features high costs and low demand, leading to the erosion of domestic production, a collapse in competitiveness, and greater reliance on imports.
Under this scenario, the UK chemical industry would struggle to contribute meaningfully to national goals such as energy resilience, net-zero commitments and regional economic development. It would also place the UK in a precarious position internationally, increasingly dependent on foreign producers for strategically critical materials and technologies.
What Needs to Change: Strategic Enablers
The good news is that there are viable, evidence-backed interventions that could materially improve the industry’s prospects. Among a broader set of seventeen options, five stand out as having particularly high potential to influence outcomes positively.
The first is securing access to competitive and diverse feedstocks. The UK’s reliance on costly fossil-based inputs such as naphtha can be partially offset by scaling up renewable and recycled alternatives. This includes chemical and mechanical recycling, bio-feedstocks from biomass, and the integration of biotechnology in refining processes. Low-carbon hydrogen and ammonia, combined with carbon capture utilisation and storage (CCUS), could also help create a new generation of cost-effective chemical inputs.
A second critical priority is scaling up domestic battery production. Batteries are central not only to the UK’s net zero strategy but also to industrial competitiveness, particularly in automotive and energy storage. A thriving battery sector would stimulate demand for advanced chemicals and materials, anchor supply chains locally, and create tens of thousands of jobs across the UK.
The third enabler is a rapid acceleration in CCUS deployment. The UK has unique geological advantages, with the UK Continental Shelf offering 25% of Europe’s CO₂ storage potential. Leveraging this could position the UK as a continental leader in industrial decarbonisation. Coupled with innovation in absorbent materials and carbon use pathways, this presents a genuine opportunity for technology leadership.
A fourth area requiring urgent attention is skills. The industry faces acute shortages of technicians, engineers and chemists, worsened by demographic shifts and Brexit-related constraints. Without a robust pipeline of talent, investment and innovation will inevitably falter. Government, industry and education providers need to collaborate on developing vocational routes, apprenticeships and retraining programmes to fill the gap.
Finally, the UK must build a credible circular economy for plastics and electronics. Advanced recycling technologies, alongside effective policy frameworks, can create low-carbon feedstock streams and reduce reliance on imported materials. Scaling up capacity in these areas would serve both environmental and economic goals.
A Sector Critical to Net Zero and Beyond
Beyond these enablers, the report reminds us that the chemical industry is a keystone sector for the UK’s green transition. Whether through the materials that make up renewable energy infrastructure, the chemistry behind sustainable transport, or the innovations supporting healthcare and defence, this industry enables progress in virtually every domain.
The COVID-19 pandemic starkly illustrated the value of a resilient domestic chemical industry. From supplying vaccine ingredients and disinfectants to manufacturing PPE materials and critical components for medical equipment, UK chemical firms played a crucial role in the national response. Such flexibility and responsiveness will be vital in future crises—be they health-related, environmental or geopolitical.
Conclusion: Turning Challenge into Opportunity
The UK chemical industry cannot afford to be passive in the face of these challenges. Nor should it be written off. As the S&P Global report makes clear, there remains a narrow but navigable path to revitalisation. This will require sustained commitment from government, industry, and academia alike—through targeted investment, smart policy, and a renewed focus on capability building.
The case for action is strong. The risks of inaction are even stronger. If the UK is to maintain sovereignty over its critical infrastructure, meet its net zero goals, and secure high-value employment across the country, then the chemical industry must be placed at the centre of industrial strategy.
There is still time to alter course—but it must be done with purpose and urgency.