Despite ongoing challenges, a new survey by the Chemical Business Association (CBA) shows signs of increased confidence within the chemical supply chain. CEO Tim Doggett examines the findings and discusses what they indicate about the current state of the industry.

Results from the most recent CBA Supply Chain Trends Survey – for the final quarter of 2023 – show that despite ongoing challenges, there are signs of increased confidence within the chemical supply chain.

For supply chains, the chemical industry and wider industry in general, the member survey provides useful insights into current and potential issues affecting the sector, as well as indicating areas of recent improvement and likely future trends. As such, it highlights areas that demand attention, not just from the CBA, but from its partners, other organisations and stakeholders within the industry.

Growing confidence

According to the Office for National Statistics (ONS), the UK’s GDP fell by an estimated 0.3% in the final quarter of 2023, while output in the production sector dropped by 1% during the same periodi. Considering that the nation, overall, was in recession, it was encouraging to see some signs of growth in the chemical supply chain, with 29% of respondents reporting an increase in orders, compared to just 5% in the previous quarter. There was also a promising upturn in sales, jumping from 9% in Q3 to 21% in Q4.

There was more optimism for the next quarter too, with 38% of respondents expecting to see sales improve over the next three months, a significant rise from the 5% of respondents in the Q3 survey. Moreover, considering that not a single respondent expected an improvement in future sales margins during Q3, it is also encouraging to see that the latest figure had risen to 17%, a considerable jump.

While it is pleasing to see this growth in optimism, the latest figures clearly indicate that, currently, this confidence is only shared by a minority of respondents. As yet, the majority are not anticipating improvement to order books, sales and sales margins, and some companies expect margins to decrease.

Employment figures within the supply chain also remain more or less unchanged. There is little indication from the survey that businesses intend to downsize their workforces, which is a positive indicator for the chemical supply chain, and at the same time highlights the investment in people to retain key talent. However, just 15% of respondents are forecasting an increase during the first quarter of 2024.

With the need to address future skills a priority across the supply chain, as well as those currently required to ensure a sustainable pipeline of talent, it is encouraging to see that 27% of respondents expect to offer wider opportunities for employee training over the next quarter. This is vital for upskilling the workforce, improving employee retention and providing a sustainable future for industry – and continues to be a major focus for the industry and key stakeholders, such as the CBA.

Over the last year, it has worked ceaselessly to provide wider opportunities for skills development, training and outreach, while encouraging its members and the industry as a whole to welcome the investment, incentivise existing employees and attract talented new recruits to replace the many experienced workers nearing retirement. In facing this challenge, industry has seen huge benefits in skills and training focused initiatives such as the People & Skills Hub (P&SH). Not only this, but initiatives such as Generation STEAM and 5050Vision from industry bodies like the CBA have been warmly welcomed, alongside the vital support offered from other industry led programmes such as Generation Logistics, of which many industry leaders are collaborating, and has seen huge engagement with young people considering careers in the logistics sector.

One area where the survey highlighted significantly less optimism is the shortage of global ocean freight containers. Considering the Red Sea attacks have forced vessels to avoid the Suez Canal and take the longer and more costly journey around Africa, it is no surprise that shipping has become an issue for 29% of respondents in the final quarter. Prior to the first attacks taking place in October 2023, the figure for the previous quarter was only 5%. Of even wider concern, and an issue for a substantial 79% of respondents, is the continued increase in the cost of shipping – something that the Red Sea problem has undoubtedly caused.

These statistics clearly indicate that the chemical supply chain continues to face significant challenges to its import and export operations. The CBA is committed to representing the interests of the chemical supply chain on these important matters and works closely with national and international governments, organisations and associations, as well as with partners and other stakeholders, to lead and lend their expertise on vital supply chain issues, such as Brexit, UK REACH and supply chain disruptions.

Overall, the results of the Supply Chain Trends Survey Q4 2023 are encouraging, as is the wider economic outlook, with falling inflation and the potential for interest rate cuts possible over the next quarter. However, as the chemical supply chain faces specific, ongoing challenges, including lack of certainty on UK REACH and a continued lack of a long-promised UK Chemical Strategy, it remains vital that the CBA, together with wider industry stakeholders, continues to provide expert and objective guidance, support and knowledge to both members and the supply chain at large. At the same time, it remains committed to addressing key issues and collaborating with stakeholders and partners to find feasible solutions, such as its work with the UK Government on a wide range of subjects, including to deliver a viable UK REACH model.