Overlooked and undervalued, the chemical industry needs attention – Inside track

Across the various policy papers published by the government last month as part of their ‘modern industrial strategy’, the word steel is mentioned 22 times. Chemicals is mentioned 14 times. Considering how much the steel industry has dominated recent news headlines, this level of focus on the chemical industry – so often overlooked and misunderstood by parts of government – is notable and welcome. But does this signal a real shift in government priorities for chemicals, or is it just lip service?

The chemical sector has been chronically underappreciated as a major part of UK industry, contributing 12 per cent of UK industrial GVA and supporting over 130,000 jobs, particularly in industrial heartlands. It is a sector that touches almost every part of the economy with a long history in Britain and a long list of crucial British inventions. However, it also carries a legacy of pollution problems, including accounting for 16 per cent of current industrial greenhouse gas emissions.

The industry’s voice is struggling to be heard
Why is such a vital industry so often ignored when it comes to industrial strategy? Part of the challenge is its complexity. The chemical sector is an amalgamation of hundreds of different companies making thousands of products, importing and exporting via a complex web of supply chains. Even if the industry managed to speak with one voice, it still has to liaise with multiple government departments – DBT, Defra, DESNZ and DSIT, to name a few – all at the same time.

Ed Conway’s recent article unpacks the myriad of reasons behind the industry’s decline, culminating in last month’s announced closure of SABIC’s ethylene cracker in Teesside. If the world were on a path to consuming far less, especially plastic, this might make sense for cutting emissions, though that is no compensation for the workers now out of a job. But in any case, the reality is quite the opposite: new ethylene crackers are simply being built abroad, in China and the Middle East.

And while this kind of offshoring may look good on the UK’s emissions balance sheet, shifting pollution overseas and hollowing out domestic industry is a combination that risks fuelling populist backlash against net zero. Even if the true reasons for industrial decline have little to do with climate action.

Government strategy sidelines chemicals
The government have decided that there are strategic reasons for keeping old blast furnaces going for the time being, to continue making virgin steel here in the UK. This has required, in effect, the nationalisation of British Steel in Scunthorpe. However, the same logic has not (yet) been applied to the chemical industry.

With each company or asset closure being a smaller piece of a bigger pie, at only a few hundred job losses at a time, instead of thousands as is the case with steel, government might be less inclined to pay attention. But ultimately, the same fate is coming. We could lose our ability to make the essential chemicals that support everyday life, from cleaning products to safe drinking water, leaving the UK further reliant on imports from elsewhere.

That reliance might be manageable from a security and resilience standpoint, if someone in government had a good handle on all those imports and strong strategic partnerships with producers around the world. Still, that would be a major strategic challenge and no help to those out of a job here in the UK. And yet, perhaps unsurprisingly, the government’s new national security strategy includes just a single mention of ‘advanced materials’.

Green chemicals are the future
The antidote to this is a thriving, green chemical industry in the UK, leading the world in low emission products. We can’t compete with China and the Middle East on low margin fossil based chemicals, but we could kickstart a new industry of chemicals made with carbon from biomass, recycled plastics or captured carbon, already attracting a green premium in certain markets. For example, we could lead the way in making green methanol, a future clean fuel and a platform chemical from which many other downstream products can be made.

In the interim, the sector may need government to step in and support some assets considered critical for national security and resilience, as it has done with steel. This is another important opportunity to show what a just transition looks like. That means training and support for all those involved, backed by thoughtful planning and worker representation on company boards.

The way forward is to embrace the complexity of a very complex industry, rather than shy away from it. It is to recognise this new world of high UK gas prices and the imperative of the green transition. And it is to invest in policies that grow the market for green chemicals, like a green carbon mandate. That’s how to build a resilient industry of the future.