The oil refinery to remain open

It was not a bluff. The owners of Grangemouth, the Swiss-based multinational Ineos, have confirmed that the petrochemical plant at the facility is to close. It follows a bitter dispute which pitted the pay and conditions of the work force against proposed future investment. The firm had put what it described as a ‘survival plan’ to the workers only to see half of them reject it. The plant will be placed in the hands of liquidators within the next week.

The Scottish Government is already looking for a buyer
The Scottish Government is already looking for a buyer
What happens next however could well be in the hands of the politicians. The Scottish Government has already announced that it was speaking to potential buyers for the site and talks are already under way between the Scottish and Westminster Governments about what to do next. That raises the question of whether the plant could be temporarily be nationalised as happened a few days ago with Prestwick Airport – though Grangemouth would be a rather different proposition.

The decision to close the petrochemicals side of the complex will affect around 800 people; however, it’s understood that the oil refinery at the site is likely to remain open. This is important not just for the security of fuel supplies to Scotland, the north of England and Northern Ireland but also for the flow of North Sea Oil through the Forties pipeline. BP’s Kinneil terminal depends on the steam and power from Grangemouth to keep the oil flowing.

Ministers’ minds will surely be focused not just on the jobs that will be immediately lost but on the thousands which depend on Grangemouth – as many as 10,000 people work either directly within the complex or for associated contractors. The local economy is reliant upon it. More people work in manufacturing in Grangemouth that in the whole of the rest of Scotland. As Scotland’s biggest industrial site, it’s also worth about £1 billion a year to the Scottish economy.

Ed Davey MP "even at this late stage, the government urges them to continue dialogue"
Ed Davey MP
“even at this late stage, the government urges them to continue dialogue”
One question which must be asked is who would buy the plant? It wouldn’t be BP as it sold Grangemouth back in 2004. Any potential buyer would have to carry out due diligence to find out the actual financial state of the operation. Ineos has insisted that the plant was losing £10 million a month; investment was badly needed and the changes to pay and conditions were the only way to secure its future. But the union’s independent adviser questioned this.

The closure was the subject of an urgent question in the House of Commons today, raised immediately after Prime Minister’s Questions. The Energy Secretary, Ed Davey, said it was “regrettable” that the two parties in the dispute were unable to reach a deal. “Even at this late stage, the government urges them to continue dialogue”, he added. “Fuel supplies are continuing to be delivered as usual. The government is working on contingency plans to ensure that disruption is avoided in future”

He went on to point out that petrochemical plants in Europe were all facing economic pressures. “Their margins are very narrow, in part thanks to people switching from petrol to diesel,” he added, before concluding: “We need to make sure that our response is strategic and based on evidence.” Whatever that ‘strategic’ response may be, the message from Downing Street is that there will be no bailout for Grangemouth, and that it was up to the company and the trade unions to resolve the dispute.

  • Antoine Bisset

    Jim Ratcliffe, via his Ineos company, bought the refinery and petrochemical plant on borrowed money in the expectation that he would be able to wring a profit from it. Money was borrowed at a high cost and needs ongoing high levels of profit to service the required return to investors and lenders. The approach had worked with previous purchases. It had to in order to pay back the lenders and investors. However, it looks like Mr Ratcliffe got his forecasts wrong and is trying to bail himself out by immorally squeezing the workers in respect of remuneration (known at time of purchase) and simultaneously put pressure on the Government to give a subsidy. Any subsidy would have to be fairly large to pay for the employment costs. Eight hundred workers will cost maybe £3.5 million a month. In addition, to allow the plant to use ethane from the USA a facility costing maybe £400m is required.
    Mr Ratcliffe may have misread the political landscape. Westminster will be in no hurry to put money into Grangemouth or to assist workers belonging to a belligerent Union. If Grangemouth closes it will be a blow to the “Yes” campaign and a fillip to those who suggest that we are “better together” even if the closure will be a case of cutting off the nose to spite the face.
    It is also a clear example of why a short term approach to business is very dicey, and why the longer term lower margin approach taken by German business succeeds for employees, investors anfd the national interest.
    Lookiing at this scenario with brutal objectivity why should the the widows and orphans of Maryhill and Niddrie fund a huge subsidy to yet another light-footed multinational that does not pay any tax in this country?