Tipping point: Threats to jobs and growth in Europe’s chemical sector
Our report for INEOS explains why the European chemical industry is undergoing a severe and sustained contraction. Structural pressures, principally high energy costs, carbon costs, regulatory and permitting burdens, are eroding competitiveness relative to the United States, China, and the Middle East.
Between 2019 and 2025Q2, the European chemical sector’s output declined significantly. It has contracted by 30% in the UK, 18% in Germany, 12% in France, and 7% in Belgium. Structural pressures—chiefly high energy and carbon costs alongside regulatory and permitting burdens—are undermining the sector’s viability.
Falling output levels and lower profitability is causing European chemical firms to cut their investment relative to their global competitors. Between 2019 and 2024, the average annual growth in European chemical firms’ investment spending was half the rate of their US counterparts (1.5% versus 3.0%). This trend is projected to continue over the next decade. This will further adversely impact the sector’s competitiveness.
Emissions data suggest that, if European chemicals production is replaced by imports from China and the US, total carbon emissions will rise. Chinese and US chemical industries emit around threefold and twofold more carbon for the same volume of output, respectively, than those in Europe. The greater distances needed to transport the imports will also add to the greenhouse gas emissions.
European policymakers face a critical decision: act decisively now to safeguard this vital strategic industry or risk its irreversible decline.
The experts behind the research
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Emily GladstoneLead Economist
Emily is a Senior Economist on the Industry team where she supports bespoke industry projects in areas such as renewable energy, construction and insurance. She is also involved in other projects like economic impact studies.
Prior to joining Oxford Economics, Emily worked for 5 years as a government economist for the UK Civil Service, working in the Department for International Trade (DIT) and the Department for Business, Energy and Industrial Strategy (BEIS). In DIT she worked on assessing the socio-economic impact of Free Trade Agreements (FTAs) and Freeports. She also worked in a crisis covid-19 analytical team, providing supply chain analysis and reporting of critical goods to ministers. In BEIS, she used economic analysis to develop policy positions for manufactured goods for both Free Trade Agreements, the Northern Ireland Protocol and the UK's Global Tariff Schedule. Emily holds a Bsc in Economics from the University of St Andrews.
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Andy LoganDirector of Industry Consulting
Andy Logan leads our Consultancy offer on different industries for clients. He undertakes studies forecasting the demand for company’s products, analysing the drivers of different industries growth, and assessing the size of different markets and industries. He also investigates the competitive pressures and opportunities facing industries now and in the future. Another area, where he has a keen interest is in studies assessing the demand and supply of labour for different industries and occupations, identifying potential skill shortages and implications for migration.
He has worked with clients in most industries, and in many countries of the world.
Prior to joining Oxford Economics, Andy worked in a variety of economist roles at the Bank of England for 15 years. His research focused on the labour market, commodity and producer prices, UK trade flows, and the performance of UK banks. He holds an MSc. and BA. degrees from the universities of London and Leicester.
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