The UK chemical sector is in trouble. That’s the view of Sir Jim Ratcliffe, the founder and chairman of INEOS, one of the largest chemical companies in the world.
Sir Jim, who is the UK’s fourth richest man, is so concerned that he told The Times newspaper last month (January) that the UK chemical sector was in danger of “extinction” due to high carbon taxes and energy prices.
While the Chemical Industries Association (CIA), the trade body for the sector, confirmed to CAT that the UK’s chemical sector’s output had decreased by 37 percent since 2021, it elected not to directly comment on Ratcliffe’s remarks.
With the UK chemical sector in the doldrums, could its demise also spell trouble for the UK aftermarket?
Take automotive components, for instance. Whether it is the electroplating of the metal chassis, which prevents corrosion, the polypropylene in the bumper, the sodium azide in an airbag system or the polyurethane in the car seats – all of these parts and many more – could not be manufactured without the chemical industry.
But not every component used in manufacturing and repair comes from the UK. CAT wanted to find out what percentage of a vehicle built in the UK is constructed from UK-made components.
The Society of Motor Manufacturers and Traders (SMMT) did not have the data, and so CAT reached out to three of the largest car producers in the UK – Jaguar Land Rover (JLR), Nissan and Toyota. JLR chose not to comment, Toyota said that it did not have information it could share, but Nissan confirmed that at its Sunderland plant, around 50 percent of the part it uses to build its models currently come from UK suppliers. As for INEOS, which makes the Grenadier, a 4×4 SUV, it is built entirely in France.
Therefore, it begs the question as to whether or not a healthy UK chemical sector actually benefits the UK car industry.
David Bailey, a Professor of Business Economics at the Birmingham Business School, believes it does. He says that a hollowing out of the UK chemical sector would deal yet another blow to the UK automotive sector and its aftermarket supply chains.
He says: “Not having a healthy UK chemical sector would push up prices. That is because the replacement parts manufactured by specific tier 1 and 2 producers depend on the UK chemical sector to produce them. If we lose that synergy, it will weaken the supply chain, meaning that parts are imported from overseas at a higher cost. This will undermine competiveness in an industry where, last year, not including the Covid 19 pandemic, output was at its lowest level since the 1950s.”
Bailey, who is an expert on the impact of Brexit on UK automotive and manufacturing, also believes a weakened UK chemical sector would have negative ramifications for the UK battery electric vehicle industry and the aftermarket.
On the contrary, a recent study conducted by Advanced Propulsion Centre UK, which explored the UK Chemical Supply Chain for Battery Manufacture, found that the sector could gain a £4.8 billion market share just through supplying UK-manufactured vehicles.
Bailey says: “Injecting nearly UK£5 billion into the supply chain would provide a strong base to substantially grow UK aftermarket capability and thus transform BEV maintenance, servicing and repair, which currently faces huge challenges around training and recruitment.”
It is optimism which is shared by Faraday Institution CEO Professor Martin Freer. While Freer didn’t comment on the aftermarket impact, he believes a healthy UK chemical sector will be crucial to the future health of the UK automotive manufacturing sector. He says there is demand for a UK EV battery manufacturing capacity of 200 GWh per annum by 2040, which would support 270,000 jobs.
However, to support a home-grown battery manufacturing industry, Freer thinks that a “concerted and coordinated effort” will be needed to strengthen battery component manufacturing within the UK to improve supply chain efficiency.
He adds: “Investing in the development of UK-based refining and processing facilities for key battery materials such as lithium, nickel, cobalt and graphite to enhance the self-sufficiency of the UK battery supply chain and reduce reliance on imports will also be key.”
CAT so contacted the Independent Automotive Aftermarket Federation (IAAF) and the National Vehicle Body Association (NBRA) but neither commented.
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