Despite growing optimism among some, the chemical supply chain faces a slew of challenges. And with so many industries reliant on the sector, addressing these is not just a priority for the industry, but for British business in general. Tim Doggett, Chief Executive Officer (CEO) of the Chemical Business Association (CBA), answers questions on the current state of the chemical supply chain also, the priorities for the sector and the new Government.
How important is the chemical supply chain to British business, and how far does its influence stretch?
The UK chemical supply chain is enormously important to British business with over 97% of all manufactured goods containing chemicals, the chemical supply chain plays a pivotal, and critical role in the operations and success of many sectors. It is not only essential to our economy, but society, as it directly and indirectly impacts the entire population of the UK.
Its influence reaches every corner of the globe, and the chemical supply chain is one of the most complex in the world. It is truly global, with raw materials and finished products, including hazardous materials, moving between or through multiple countries. It includes not just distributors and manufacturers, but also logistics companies that import, export, process, store and transport raw materials and finished goods. Alongside service providers and suppliers, they are collectively the main chemical industry interface providing products and services to virtually every sector. It is not inconceivable, therefore, that if the chemical supply chain came to a halt, large swathes of British industry would follow suit. The economic impact would be disastrous.
Just as catastrophic would be the impact on society. Without the chemical supply chain, countless products that people rely on every day would become unavailable, including food and medicines, ultimately effecting the public’s health and access to essential goods and services.
While the chemical industry might be seen as polluter of the past, it is the key to a sustainable future – in fact, sustainability is the golden thread that runs through and impacts everything, and we are committed to weaving it into every aspect of our culture and operations.
The UK chemical supply chain is also a global market leader. Manufacturers and suppliers around the world rely on it for its expertise, research and development, while other companies rely and depend on it for its ability to source, transport and supply goods, particularly high quality and specialty chemicals. Issues that affect the chemical supply chain generally have a global impact and can cause far reaching disruptions.
What have been the major setbacks, disruptions and challenges the chemical supply chain has faced in recent years?
It was well publicised that the pandemic was a major cause of disruption, with businesses forced to halt, scale down or change production for long periods. Its effects are still felt even today. Another event in recent years which hit the headlines was when the Evergiven ran aground in the Suez Canal, which further highlighted our dependence and reliance on global supply chains.
The Russia-Ukraine war exacerbated the disruption and instability within supply chains and continues to cause significant challenges as both nations are important suppliers of raw materials in the chemical supply chain. The ongoing conflict and sanctions have increased scarcity of some items and pushed up global prices, not least, energy costs. In terms of logistics, the war has made key Black Sea ports unviable, while also affecting road transport – at the time of the Russian invasion, some East European haulage fleets consisted of up to 40% Ukrainian drivers, many of which returned to serve in the Ukrainian armed forces.
The more recent attacks on ships in the Red Sea have had a further significant impact, as shipping lines have no option but to avoid the area and route vessels around Africa, delaying deliveries, dramatically increasing shipping costs and reducing the optimisation of vessels resulting in reduced capacity.
Another major disruptor was Brexit with the process failing to sufficiently take into account the impact on businesses, which had enjoyed unfettered trading access throughout the EU Single Market since 1993. It has had many long-term negative impacts on the chemical supply chain, creating supply issues as well as affecting the workforce, in turn forcing some companies to move operations to the EU.
Meanwhile, the introduction of bureaucratic and customs procedures increased the complexity, workload and import/export costs for businesses, with the formalities frequently causing complications and significant delays at ports. For many businesses it meant switching from a ‘just in time’ model, to ‘just in case’, which in turn led to stockpiling and overstocking, causing not just storage capacity issues, but also negatively affecting cashflow. The many changes required considerable time, resources and investments and in extreme cases, some companies discontinued certain trade lanes or simply ceased trading entirely with the EU.
Perhaps the single biggest impact to the chemical supply chain in recent years is UK REACH, which is a result and casualty of Brexit, and it was fundamentally flawed from the outset in access – or rather, lack of access – to data. Pre-Brexit, the UK followed EU REACH and UK industry spent over £500 million on data to comply with this regulation. In order to comply with UK REACH, this effectively requires duplication of the same data, which DEFRA has estimated will cost around £2 billion and as much as £3.5 billion.
UK REACH not only affects the chemical supply chain and the wider chemical sector, but downstream users, who were previously not within the scope of the regulation. From the outset, the CBA has worked tirelessly to highlight the issues and to offer solutions.
Having made the first major breakthrough, back in December 2021, when DEFRA stated it would explore alternative arrangements for UK REACH registrations, progress has been frustrating and painfully slow. It has to become a top priority for Government, as the uncertainty around UK REACH continues to stifle investment, resulting in it having a negative impact not only on the chemical industry, but industry as a whole and its ability to trade, innovate and grow.
The ongoing uncertainty of UK REACH, as well as the widening gap between UK and EU laws and regulations causes notable problems, complication, and confusion, with the result that companies are potentially unable to source materials, export, import them or indeed manufacture them, simply making them commercially unviable.
Our ambition remains the same, to make UK REACH proportionate, effective and efficient, for industry and regulators alike, with no reduction in standards.
It is crucial that the Government listens to the ‘lived experience’ of British business on this issue and commits to reaching a workable UK REACH model that upholds existing human health and environmental protections, whilst minimising the negative effects on UK industry.
What’s more, where infrastructure improvements have been made, the Government is levying charges to pay for them. As an example, on April 30th, 2024, the Common User Charge for importers of Animal Products, Plants and Plant Products to cover the cost of updated controls and systems was introduced.
Brexit has also impacted the labour market. It is well documented that fewer EU nationals now work in the UK. According to the University of Oxford’s Migration Observatory, the number of EU nationals working in the UK peaked at 2.66 million in 2019 and had fallen by 7% by 2022. At the same time, the new immigration system restricts the employment options of EU workers. This has inevitably impacted the chemical supply chain, while a shortage of HGV drivers continues to be a problem, albeit this is not limited to being a UK issue, but rather it is a global and chronic problem.
On the domestic front, a principal issue for the chemical supply chain is ensuring the long-term sustainability of a skilled workforce. With such a wide range of skills required across the industry, upskilling and retaining current employees and recruiting the next generation of suitably skilled workers is essential. However, there remains a shortage of skills within the sector, too few people are studying the necessary subjects and not enough of these see the sector as an employer of choice. It is vital for the future of the wider supply chain that this trend is reversed.
While recruitment may not currently be an urgent issue generally for the chemical supply chain, there is an increasing ‘war on talent’, as well as several factors that are likely to have an impact, such as many experienced members of the workforce approaching retirement and skills shortage in the cohort that will step into their roles. There is also a lack of awareness of the career opportunities that exist which along with negative perceptions of the chemical supply chain prevent potential recruits seeing it as a choice employer.
How is the industry responding?
It is the responsibility of associations and industry stakeholders to be a voice for change, lobbying for workable solutions to current challenges. One area where there has been considerable effort is with UK REACH. As a result of the work that has gone into this, the UK REACH deadlines have now been extended by and there is consultation on the alternative transitional registration model (ATRm).
In addition to lobbying, the CBA for example has been helping members through programmes like the ongoing Best Practice Workshops, Online Clinics and webinars, as well as one-to-one advice services, such as the Helpdesk or Compliance on Demand.
To ensure there is a current and future sustainable pipeline of skilled employees that will allow the UK’s chemical industry to continue to innovate and grow, the CBA has made it one of its missions to establish the chemical supply chain as an employer of choice. It is leading and involved in a variety of initiatives, both internally and industry-wide, that seek to improve skills, recruitment and retainment. A key objective is to attract new and future talent into the chemical supply chain, while at the same time, supporting those already working within it.
Generation Logistics, which is an industry-wide initiative, that has received significant financial backing and support from the Department for Transport, has had huge success in showcasing the various roles available within logistics, which employs over 8% of the UK’s workforce, with supporters and ambassadors from all sectors of British industry. The campaign achieved 3.3 million engagements in its first 12 months.
A CBA led initiative, Generation STEAM, which adds the A for Arts, recognises that creativity is becoming increasingly important, not least to provide a competitive advantage, especially in the new age of Artificial Intelligence. By widening our thinking, we can open our industry to a wider talent pool, that may have thought it was not necessarily a sector for them to seek a career in.
The CBA’s Future Council, meanwhile, brings together young industry professionals to share ideas and collaborate on projects, including advocating for the industry and highlighting the chemical supply chain’s diverse careers in schools and universities.
We are not only focusing on future generations. We fully recognise the merits in embracing seasoned professionals, over the age of 50 and that employers must create a workplace that values and utilises the talents of all employees, regardless of age.
Our 5050Vision highlights the value of this segment of our workforce, and we are proud to showcase the benefits of retaining and actively engaging with these experienced individuals, who can offer a wealth of knowledge, expertise, and institutional insight, whilst driving innovation, enhancing safety protocols and mentoring the next generation of talent. We are at the same time also keen to attract those that may be returning to work after a career break, or indeed looking for a career switch. 5050Vision is a beacon of change, which will guide us in building a better future for everyone.
In 2023 alone the CBA engaged with over 18,500 young people to highlight the career opportunities available to them in the chemical supply chain, in addition to emphasise the countless routes into the sector, many of which are not linked to academic achievements. We also recognise that at every stage of education, children from less advantaged backgrounds perform significantly worse, which is why we have an industry that supports everyone to find a career, hence Generation STEAM, Generation Logistics and 5050 Vision.
The CBA Sustainability Hub, an initiative committed to sustainability and net zero, enables companies to access bespoke support on a broad range of interests and issues. As such, it bridges the gap between talent and opportunity, ensuring the industry has the right people to drive progress. These, of course, are just a sample of the many industry-wide initiatives currently in place.
What can the new Government do to support a healthy, sustainable and reliable supply chain?
For many years we have worked closely and extensively with Departments across HM Government, both in the UK and overseas, and we look forward to this continuing. We also work on key objectives such as promoting business and trade, knowledge and information sharing, not to mention capacity building in areas such as people and skills through to international security and safety.
The most important step the new Government can take, is to work in partnership with the industry to establish a government-wide dedicated chemical strategy. Covering everything from import/export logistics and manufacturing to regulation, this must seek to improve and support all aspects of the industry, including the chemical supply chain.
Furthermore, the Government must listen to the views of British business on UK REACH whilst endorsing and supporting ongoing initiatives, like Responsible Care, which aims to improve industry sustainability, and the People and Skills Hub.
To overcome supply chain disruption and safeguard the import of vital goods, it is also crucial that the work of the Critical Import Council continues.
Finally, to encourage economic growth within the logistics industry, the Government needs to ensure that the industry is represented on the new Industrial Strategy Council.
Overall, the Government can play an invaluable role in ensuring long-term sustainability and economic growth in the industry, by supporting and working in partnership with associations like the CBA to address issues, break down barriers to opportunity and kick-start economic growth in the chemical sector
Involved, knowledgeable and collaborative, the CBA works with connections, partners and stakeholders, on an international scale, to directly address the issues facing the chemical supply chain.
