From Global to Local: The Strategic Shift Towards Reshoring Essential Chemical Manufacturing

In recent decades, globalisation enabled the chemical manufacturing industry to outsource production to regions with lower labour costs, abundant raw materials, and favourable regulatory environments, resulting in reduced production costs and higher profit margins. However, this global expansion also increased exposure to risks, volatile pricing, and complex supply chains. 

Today, geopolitical tensions, supply chain vulnerabilities, and rising environmental concerns are driving companies to consider reshoring—bringing essential chemical manufacturing back home in a strategic shift from global to local.  

To protect long-term financial stability, bolster supply chains, and improve environmental credentials. 

Reshoring: A Strategic Necessity 

Reshoring offers more control over production, enabling shorter logistics, enhanced quality and safety measures, and focused innovation to drive efficiency and reduce energy consumption. The UK chemical sector, one of Europe’s largest, generates around £60 billion in annual turnover and provides employment for approximately 500,000 people directly and indirectly. 

It is also a significant exporter, with chemical products accounting for about 10% of the UK’s total goods exports. One of six foundational industries, the chemical industry is a critical pillar of the UK economy, supporting various downstream sectors like automotive, construction, and agriculture. 

Around 95% of manufactured products rely on chemicals and over 75% of materials around us are produced by foundation industries, making them vital for economic stability and future security. Presenting a significant opportunity for economic growth by reducing dependence on foreign suppliers, strengthening the industrial base, and creating high-value jobs, especially in regions affected by de-industrialisation. 

Over the last 10 years, Chinese dominance in the chemical industry has significantly increased, accounting for 40% of market share. Whilst Europe remains steadfast in second place, generating annual sales of more than €760 billion, its share of global chemical sales dropped from 17% to 14% in the same time period, prompting concerns about its future.  Further compounded as China, once a hub for basic commodity chemical production, is now increasing focus on fine chemical production and investing heavily in R&D.  

Enhancing Resilience and Sustainability 

In addition to economic growth, reshoring is crucial for enhancing national security and supply chain resilience. The pandemic and more recently the war in Ukraine exposed the risks associated with relying on global supply chains, especially for essential chemicals. Bolstering UK/EU production reduces these vulnerabilities, ensuring a more stable supply of critical materials. By investing in domestic production, the UK and EU can reduce dependence on foreign suppliers, strengthen industrial bases, and create high-value jobs, particularly in regions that have been affected by deindustrialization. 

Navigating the Challenges of Reshoring 

While the benefits of reshoring are clear, the process is not without challenges. Initial relocation costs, including investments in new facilities, workforce training, and technology implementation, are substantial. More stringent UK regulations and higher labour costs will impact short term profitability, but companies must carefully assess these factors against the strategic longer-term advantages of reshoring to ensure a successful transition. 

Government support will be crucial in overcoming these challenges. Incentives such as tax breaks, grants, and infrastructure support can make reshoring more attractive to companies. A good example is UKRI’s Transforming Foundational Industries (TFI) Challenge which aims to transform UK foundation industries over the course of the next five years.  Supporting them to grow, become more environmentally efficient and become more attractive internationally. This type of collaboration between industry and policymakers will be essential to overcoming barriers and ensure that reshoring delivers on its promise of greater resilience and sustainability. 

Sustainability and Innovation: Leading the Green Revolution 

The economic impact of the UK chemical industry extends beyond production and exports. The sector is a major driver of innovation, with over £5 billion invested annually in research and development (R&D). This investment fuels advancements in areas like sustainable chemistry, advanced materials, and pharmaceuticals, helping to maintain the UK's competitive edge in the global market. 

In addition, reshoring aligns with the UK’s stringent environmental regulations, offering an opportunity to advance sustainable practices in chemical manufacturing. By leveraging green chemistry, automation, and AI, reshored operations can reduce energy consumption and lower emissions. The UK’s commitment to reducing its carbon footprint can be bolstered by reshoring, as local production allows for better compliance with environmental standards. This not only helps meet climate targets but also positions the UK as a pioneer in sustainable industrial practices. 

How HydRegen Technology Supports Reshoring 

HydRegen’s 'slot-in' technologies present a promising route to advancing a sustainable chemical manufacturing sector in the UK. Our innovative, bio-based approach simplifies the transition to green chemistry while ensuring economic viability. By seamlessly integrating into existing infrastructure, reducing reliance on imported precious metals, and cutting energy consumption through milder reactions, HydRegen’s technology delivers significant benefits. 

It achieves a threefold reduction in CO2e emissions and offers cost savings of up to 40%. These advantages not only facilitate the shift to a more sustainable chemical industry by overcoming barriers like disruption and expensive infrastructure changes but also address the higher costs associated with reshoring. 

HydRegen’s bio-based solution effectively makes biology function like chemistry, making it an ideal partner in reinforcing the UK chemical industry. With government support and advancements in bio-based technologies, reshoring is now increasingly becoming a viable option. 

 Conclusion: The Future of UK Chemical Manufacturing 

This strategic shift from global to local in chemical manufacturing reflects a broader rethinking of how companies manage risk, sustainability, and competitiveness in an increasingly complex world. Reshoring essential production could be the key to securing the UK’s position as a leader in sustainable chemical manufacturing. Offering a pathway to greater economic resilience, innovation, and sustainability, reducing vulnerability to global disruptions, and making it more aligned with its environmental and economic goals.