Clusters of related industries have stood together and prospered in the good times, but their interdependence means they could now topple like dominoes as recession bites – unless there is government help or radical change.

At Wilton on Teesside, the giant 2,000-acre complex built by ICI in the 1940s illustrates the dangers that weak global demand and growing foreign competition pose to integrated supply chains.

In the 1990s the site was broken up into separate companies,and this year four of its six chemical and petrochemical operators have announced they are closing plants. Some 1,000 of the cluster’s 5,000 jobs will go. Are the dominoes starting to fall?

“This isn’t a trickle, it’s a tsunami,” says Phil McNulty, chemicals sector officer for the union Unite. He fears that Wilton is in a “critical condition” because the government and the public have failed to recognise how the sector underpins the entire manufacturing economy as a source of raw materials.

Most seriously, US-owned Dow Chemical, the UK’s sole producer of ethylene oxide, announced in July it was shutting its plant – news that immediately triggered the closure of nearby customer Croda International. Ethylene oxide is a hazardous substance and hard to transport, so Croda said it would move production of goods that depended on it closer to supplies in continental Europe. Dow’s main concern, however, was not with ethylene oxide but the price of another of its Wilton products, monoethylene glycol, which was sinking because of increasing capacity in the Middle East.

This knock-on process could be replicated for other chemicals, observers fear.

The North East Process Industry Cluster, which has 500 members, and other industry bodies have given the government a list of key strategic materials of which the UK now has only one producer. “The government has to stand beside us and become activists on behalf of the industry,” says Stan Higgins, Nepic’s chief executive. “We believe there should be a proper manufacturing strategy for the UK,” he says. “It’s that kind of strategic thinking that we need.”

Mr Higgins is convinced that a cabinet member for industry could have stepped in when it became clear that Dow’s closure at Wilton would also shut Croda. “Had we known Dow was going to do this we would have worked with them to find a new owner.”

The government has been swifter to act in higher-profile cases, such as the motor industry.

Steve Radley, chief economist of the Engineering Employers’ Federation, says the state incentive for people to trade in old cars for new came in the nick of time. “Without that help we would have started to see significant problems at big companies in the supply chain within months,” he says. “The severity of the recession and the damage it has done to supply chains caught most people on the hop.”

Weakness has now spread to the aerospace sector, which had been flying high. That is concentrated in the south-west around Bristol, and the north-west, where many engineering companies also supply the motor industry, creating a squeeze from both sides.

There are three dominant companies: Airbus, which makes wings in north Wales; BAE Systems in Lancashire and Cheshire; and Rolls-Royce in Liverpool. All are under pressure in the downturn and BAE is vulnerable to cuts in defence spending– it recently announced it was closing Woodford aerodrome, where it makes the Nimrod, in 2012 and shedding 1,000 jobs.

The government pledged to support industrial clusters after a report in 2000 identified 70 in the UK. Many, such as the biotechnology industry around Cambridge and caravan makers in Hull, are struggling because of a lack of finance or demand.

Public spending cuts could also add to the pain. Railway-related businesses in and around the East Midlands city of Derby are keeping a wary eye on next year’s general election, which could bring a cost-cutting Tory government to power. The 100 or so companies, which employ more than 6,000 people, are travelling hopefully rather than arriving.

Michelle Craven, vice-chair of the Derby and Derbyshire Rail Forum, says: “Rail businesses are struggling at present but that is to do with the phasing of procurement. There is an expectation that the money will be spent.”

But an executive at one large engineering business is less sanguine: “Who knows what will be delayed or cut in the current financial climate?” He cites uncertainty over whether Crossrail will proceed, although by the time of the election next spring the vast London project could have a momentum that would prove hard to stop.

Mr Radley says Lord Mandelson’s latest industrial strategy is a start. “But we need to start seeing actions, not just words.”

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