Market Report: UK Chemical and Allied Industries, International Trade and the Single Market

The Chemical and Allied Industries is one of the UK’s most important international markets, with exports accounting for approximately £55 billion a year.

A report by Euler Hermes, estimates that the industry will be the hardest hit by the Brexit, if no Free Trade Agreement (FTA) is reached. With potential loses of up to £7 billion, double the second most affected industry ( machinery and equipment, £3.5 billion). Even if a FTA is agreed, the industry still stands to loose £2.5 billion. 

Here I report an overview of the UK’s Chemical and Allied Industries international trade, broken down by commodity code, more specifically HS classification. A breakdown of chemistry based HS codes can be found here. The data was been split into two groups: inside the single market (EU and ETFA  countries) and outside. The data used is for 2016, as the data for 2017 is incomplete. The source of data is the UN Comtrade website.

Overall, across all HS codes, the value of both UK exports and imports is on approximately between £4-5 billion per month, with the latter being slight lower. A graph of exports and imports per month, split by the single market Vs rest of the world is shown in Figure 1. On average, internal single market trade accounts for 60% of total exports. With exports per code ranging from 50 to 80%. Imports from within the single market account for an average of 76% of the UK’s World imports, ranging from 46% to 88% per HS code.

 

                                                  Figure 1. World trade within and outside the Single Market.

Looking at individual HS classifications, some are affected more than others. This is illustrated by plots drawn for monthly totals showing: World, Single market and outside single market trade. Single market trade as a percentage of world trade was also plotted, on a secondary y-axis. The plots for each HS code can be seen in the attached PDF, an example plot is shown below, in Figure 2, using HS 28, Inorganic.

                                            Figure 2. UK Exports for HS 28 (Inorganic) inside and outside the Single Market.

Given the statistics, trade within the single market clearly accounts for a substantial volume of the UK’s international Chemical trade; particularly when considering that these totals are derived from only 31 countries within the single market. Only 2 of our top 10 trading partners are outside the single market – the USA and China.

However, Brexit will allow the formation of new trade agreements with countries outside of the EU. The analysis suggests that the most attractive trade partners, based on current trade, are: USA, China, India, Japan, Canada, Australia, Russia, Saudi Arabia and the United Arab Emirates, as well as countries within the EFTA.

 

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