New research from Imperial College London reveals that the UK's chemical industry is experiencing a rapid downturn, with the closure rate of high-end chemical companies doubling between 2020 and 2025, posing a potential threat to the nation's ability to manufacture pharmaceuticals, missiles, and other strategically critical products.

The impact is particularly severe on high-end chemicals that support advanced manufacturing sectors such as aerospace, biopharmaceuticals, automotive, and electronics. The report identifies high electricity prices, rising compliance costs, a weakening domestic supply chain, aging factories, and competition from China as the primary factors driving the industry's decline.

While the UK has long struggled to compete with China in bulk chemicals, it had previously maintained global competitiveness in specialty chemicals, which are suitable for production by small and medium-sized domestic factories. However, between 2020 and 2025, the contribution of specialty chemicals to the economy has fallen by 70%.

The report's authors warn that the shrinkage of the high-value-added chemicals sector has become a drag on macroeconomic growth, and that both industry and government need to act swiftly to reverse this trend. The industry's decline has profound implications for the UK's strategic autonomy.

The report notes that ongoing factory closures further limit the UK's capacity to rapidly expand the production of essential pharmaceuticals. At the same time, in the field of armaments production, the UK is increasingly dependent on imports of key reagents, including defense-grade materials such as concentrated nitric acid, which is needed for manufacturing bullets, shells, and missile propellants.

The report emphasizes that defense-grade chemicals are distinct from commercial chemicals, requiring specialized facilities, quality assurance, and safety protocols, and once lost, their production capacity is difficult to quickly restore. Six months ago, the UK Chemical Industries Association wrote to the government, stating that the industry is facing a fight for survival.

In May, the government announced the establishment of a £350 million fund to stabilize the financial position of key chemical manufacturers in the defense, pharmaceutical, and energy sectors. However, the industry association stated that this is only a small step towards building a solid foundation for the sector.

The report also calls on the government to take measures to protect the domestic industry from the impact of Chinese overcapacity entering the UK market, and to prevent UK companies from being acquired by competitors. The UK's Department for Business, Innovation, and Trade responded by stating that it has taken steps to reduce electricity costs for manufacturers, supported producers of critical chemicals for the food, energy, water, and healthcare industries, and is addressing high electricity prices through its industrial strategy, while also implementing trade measures on chemical product imports.