CBA askes its members’ opinions

FORTUNE TELLERS

CONFIDENCE • CBA’S LATEST MEMBER SURVEY REVEALS DEEPENING CONCERNS AMONG THE UK’S CHEMICAL DISTRIBUTION SECTOR, AMID CONTINUING UNCERTAINTY OVER BREXIT

WHEN THE CHEMICAL Business Association (CBA) conducted its last survey of the UK chemical distribution sector in April of this year (HCB May, page 80), it provided evidence of uncertainty, stockpiling and predictions of a drastic downturn in sales volumes and margins ahead of the UK’s exit from the EU under terms yet to be decided. CBA’s subsequent survey, conducted between 4 and 12 July and involving responses from 51 member companies, shows that those earlier forecasts are coming true, with further negativity predicted throughout 2019.

The positive results shown in April’s survey were largely attributed to businesses accumulating stock in preparation for the uncertainties of Brexit. Extending that deadline to the end of October has not helped; meanwhile, the stockpiling seen at the beginning of 2019 had to stop at some time and it appears to have stopped now.

Orderbooks and current sales have both fallen by 60 per cent in the quarter since the last survey. CBA members were asked if their order books are better, worse or the same than during the previous three months and July’s results have shown a negative balance of -26 per cent compared to the positive balance of +34 per cent back in April.

STORM CLOUDS ARE GATHERING OVER THE UK’S

Looking at sales volumes, another drastic swing of 61 per cent has taken place. Current sales volumes show a negative balance of -17 per cent, a colossal shift from the positive balance of +44 per cent in April. Members were asked to look forward three months at their projected sales volumes; the survey results reveal a deepening negative trend of -14 per cent from -7 per cent three months ago.

Furthermore, sales margins have followed in the same fashion, swinging by 40 per cent. Current sales margins have now swung into negative territory (-18 per cent) from the growth of +22 per cent reported in April.

CBA’s chief executive, Peter Newport, says: “Our last survey three months ago showed large scale evidence of stock building as companies ensured they could maintain supplies to customers after the anticipated Brexit date of 31 March 2019. A combination of cash flow constraints and the limited availability of storage capacity has now brought this stock building process to an end. The three-month outlook for order books, sales and margins is uniformly negative as Brexit uncertainty continues.”

SILVER LININGS? Slightly reassuringly, the steep decline in sales margins is forecast to slow over the next three months, but the negative trend is set to continue. CBA members have reported a negative balance of -21 per cent when considering next quarters’ sales margins.

The companies in the survey were also asked if their employment levels are expected to be higher, lower or remain the same over the next three months. The current survey shows a continuation of April’s positive employment outlook, at +2 per cent, but a significant fall from the positive +18 per cent balance previously reported. However, it should be noted that this is the lowest level recorded since the CBA surveys began in 2013.

CBA’s next survey is due to take place in early October, immediately prior to the rescheduled Brexit. It is to be hoped that industry faces greater clarity about future trading capabilities by then. HCB www.chemical.org.uk