UK chem distribution to grow by 5% until 2020

14 March 2016

Jonathan Lopez

The UK chemicals distribution sector will register a compound annual growth rate of 4.6% from 2015 until 2020, although the positive outlook is haunted by uncertainty surrounding the impact of EU chemicals regulations and the upcoming referendum on the UK’s membership to the 28-country bloc, according to a consultancy.

Analysts at Chemability said in its UK Chemical Distribution 2016 report the sector was worth €5.6bn in 2015, representing around 10.6% of the €53bn European chemicals distribution market.

During the period 2015-2020, the 4.6% annual growth in the industry will come from above-GDP growth in end use markets for distributors, further services outsourcing from chemical producers and a continued expansion abroad, Chemagility said.

“This positive outlook assumes no further exogenous shocks from geo-political events or a significant slowdown in the global economy. There is also a high degree of uncertainty surrounding the impact of the Reach 2018 deadline and the upcoming UK referendum on the industry,” said the consultancy’s managing director, David Brown. 

The EU’s regulations for the registration and authorisation of chemicals, known as Reach, marks 2018 as the deadline for small and medium chemical producers (from 1 to 100 tonnes/year produced) to register their substances.

EU chemical players have voiced their concern small producers will find it hard to deal with the red tape it implies.

Chemagility said the UK’s chemical distribution sector had posted average annual growth of 6% between 2000 and 2008, to slow down to an annual growth following the financial crisis of 4.5% between 2010 and 2014.

“This ‘golden era’ was punctuated by only one year of contraction in 2009, at the height of the global financial crisis, from which the industry quickly recovered,” said the consultancy.

However, it added the recession had accelerated structural changes and rationalisation within the industry with plant closures, although it also led to supply chain weaknesses, according to Chemagility’s David Brown.

“This created gaps in the marketplace that agile, entrepreneurial distributors were quick to exploit," he said.

“UK distributors were also bolstered by on-going outsourcing trends from producers, keen to reduce costs and focus on their core competencies, as well as chemical companies in the emerging economies of China and Asia-Pacific who were looking for partners to facilitate exports to the UK and Europe.”

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