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.
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.
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.