Jobs across the UK chemicals industry could be at stake over the long term if it remains dependent on fossil fuels and the government fails to support its decarbonisation, according to an environmental think tank.
Researchers at Green Alliance have published a new assessment of UK government support for the chemical industry’s transition away from fossil fuels which says the “the outlook is worrying”.
So far, the government’s strategy to cut emissions in the chemical industry has largely focused on carbon capture utilization and storage (CCUS) the thinktank said, backed by a promise of £20 billion in investment, and a switch to hydrogen fuel, supported by £240 million in capital expenditure.
But other policies essential to a greener chemicals industry “are lagging far behind”, Green Alliance warns.
The government “doesn’t adequately support electrification”, which is key to the chemical industry reducing its reliance on fossil fuels, the think tank said, noting that industrial electricity prices in the UK have been consistently higher than the EU average. “Meanwhile, no incentives currently exist for companies to replace fossil fuel feedstocks. The renewable transport fuel obligation and the planned sustainable aviation fuel mandate both incentivise using alternative feedstocks in fuels rather than in chemicals,” it warned.
“140,000 is the number of people directly employed by the chemicals industry in the UK. These are generally well paid, skilled jobs, located outside of London and the south-east. Our analysis highlights the worrying outlook for the industry given the policy space that it operates in. The competitive international nature of chemicals production means there is a real risk that offshoring continues at the expense of these jobs,” said Green Alliance policy analyst Will Carr.
But Green Alliance also said that if plans for a greener, modernised sector are written in to the UK’s forthcoming industrial strategy, it could create opportunities for growth and support the UK’s economic resilience, and industrial heartlands in the North West, Teesside and Humberside in particular would be likely to benefit.
Liam Hardy, senior policy analyst at Green Alliance said: "We need a UK chemicals industry, the highly skilled jobs it provides, and the contribution it will make to a greener economy.” But he said it will take deliberate government policy to find a way forward: for example, by requiring a certain amount of carbon in chemicals to come from greener sources through a green carbon mandate.
Hardy said that the businesses had complained that innovation funding is often complex, overly prescriptive and focused on the short term.
“The forthcoming industrial strategy is a key moment for the government to set out a plan for a thriving green chemical industry fit for the future,” he said.
The UK chemicals industry contributes 19 per cent of the UK’s industrial emissions and relies heavily on fossil fuels for energy and as a feedstock. But it’s also the source of innovation that can help phase out fossil fuels and decarbonise supply chains across the wider economy.
Adding to the complications, UK chemicals businesses are very exposed to international competition, given their comparatively high operating costs, and the global market for chemicals. In 2023, output across the UK chemicals industry fell by nine per cent and employment by seven per cent, Green Alliance noted.
SCI has been calling for the government to adopt an industrial science and innovation strategy including the creation of an Innovation & Science Growth Council, along with simplifying R&D tax incentive schemes, and increased government investment in R&D, as part of its Manifesto for an Industrial Science and Innovation Strategy. It’s an approach could create an additional £230bn in GVA and 240,000 jobs by 2030 in the life sciences and clean tech sectors alone.
David Bott, Head of Innovation at SCI said: ‘The UK has a long history of innovation and expertise in chemicals, but the government has never really understood our industry. It’s now under threat from international competitors offering better incentives to pursue a greener future, and better-aligned regulation. We need an industrial strategy that helps steer the UK chemicals industry on to a positive path, directing its attention towards long term risks and opportunities.’
Thomas Birk, managing director at BASF added: “A strong and competitive chemicals sector needs to be at the centre of our ambitions for a net zero transition. To achieve this, the UK sector needs a clear vision for its future, delivered through an industrial strategy and leveraging the UK’s R&D leadership position as well as supporting secure and resilient supply chains.”
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