Grangemouth plant shutdown leaves government fighting to save 800 jobs

Workers walk through the Grangemouth oil refinery in Falkirk, Scotland. Photograph: David Cheskin/PA

The government is scrambling to save 800 jobs at the Grangemouth petrochemicals site in Scotland after its owner, Ineos, abruptly closed the plant in a rancorous industrial dispute.

As the energy and climate change secretary, Ed Davey, said that "all efforts" would be made to rescue the plant, Ineos also refused to rule out closing the oil refinery on the same site.

Workers were given the grim news at a meeting with Ineos's chairman, Calum MacLean. Ineos had given the workforce until Monday evening to accept its demands for radical changes to terms and conditions but the company concluded there was not enough support.

Its decision means that up to 800 petrochemicals workers will lose their jobs, and it threatens the positions of some 600 or more employees at the refinery plus 2,000 contract staff.

Staff reacted with shock to the news, as Ineos followed through on its warning that the threat of closure was not a bluff.

The fate of the giant plant on the Firth of Forth has far-reaching implications for Scotland and the UK. Grangemouth is Scotland's biggest manufacturing business, its refinery supplies most of its fuel and the petrochemicals plant produces plastics used in industries ranging from cars to packaging.

In an urgent question on Grangemouth in parliament, Davey told MPs repeatedly that the government wanted the plant to stay open if at all possible. It would still consider a business case to provide investment to help keep the plant running.

"We will be using all our efforts through the [Business] department and UKTI [UK Trade and Industry body] to assist should we need to have a buyer for the petrochemical plant," he said.

However, Ineos has already warned that the refinery – currently shut down because of the dispute – could be closed permanently if the Unitetrade union did not agree to a no-strike deal.

Davey also confirmed that detailed contingency plans had been drawn up to protect firms and customers from running out of fuel and chemical supplies. He met MPs later to discuss the issue in more detail.

Downing Street has insisted the closure of the Grangemouth refinery would not pose a threat to fuel supplies, after the AA warned it could hitpetrol prices. The prime minister said in an answer to a parliamentary question from the Labour MP Tom Watson that ministers had discussed the closure during Cobra meetings.

Downing Street dismissed speculation that the plant could be nationalised, saying it was a matter for unions and owner to resolve. The prime minister's spokesman said it was disappointing that the petrochemicals side of the plant had closed and called on "both parties" to "continue their dialogue" over the future of the refinery.

The closure of the petrochemicals plant follows a standoff between Ineos and Unite, which represents about 1,100 of Grangemouth's permanent employees as well as many contract workers. Many businesses – from the Rumbling Tum burger van near the site to cab firms, pubs and hotels – rely on trade from Grangemouth.

Gordon Alexander, who owns Grange Radio Cabs, said closure would devastate local businesses. "Local shops and local snack bars would definitely go out of business. We do a lot of executive work for them and if they were to close I would probably lose about half of my 50 cabs."

Edmund King, the president of the AA, warned that petrol prices could rise if Grangemouth and other European refineries closed down.

"The AA is concerned with the impact of this refinery closure," he said. The European commodity trading houses have been predicting the loss of five to six refinery plants over the next two years.

"In March to April of last year, with the closure of refineries and the impending start of the US motoring season, wholesale prices went up by 20%, adding 8p to 10p to a litre of petrol. The spike was short-lived because US drivers cut back and some of the refineries were bought. However, the damage was done and a new UK petrol record [142.48p a litre] was set."

Bitter dispute

The announcement follows the passing of a deadline on a survival plan put to employees, which asked them to accept changes to pensions and other terms and conditions.

The Unite union said about 680 of the site's 1,370-strong workforce had rejected the company's proposals, which include a pay freeze for 2014-16, removal of a bonus up to 2016, a reduced shift allowance and ending of the final-salary pension scheme.

Ineos said its owner, Jim Ratcliffe, and other shareholders met on Tuesday to study the response from the workforce to their survival plan, and wanted the employees to be the first to know of any decision the company made.

A dispute over pay and conditions at the oil refinery remains unresolved.

Unite has accused the company of "playing Russian roulette" with the future of Grangemouth, the biggest industrial site in Scotland, and is backing any efforts by the Scottish government to find a new buyer for the oil refinery and petrochemical complex.

Ineos sent a letter to workers last Thursday asking them to indicate their rejection or acceptance of the plan.

It said those who supported the survival plan would receive a transitional payment of up to £15,000.

The two sides have been embroiled in a bitter dispute for weeks, initially over the treatment of the Unite convener, Stephen Deans, who was involved in the row over the selection of a Labour candidate in Falkirk, where he is chairman of the constituency party.

He was suspended, then reinstated, then was subject to an internal investigation, which is due to report on Friday.

The dispute has since widened to the future of the entire site, with Ineos warning that it would close without investment and changes to pensions and other terms and conditions.

The company said the plant, which has been shut down since last week because of the dispute, was losing £10m a month.

Ineos had said it was ready to invest £300m in Grangemouth, but only if workers agreed to the new terms.

View from the workforce

Gordon Stewart joined the chemicals business five months ago. He is a Unite member.

"I was attracted by a set of pay and conditions and I left a good job somewhere else. They have explained that because of the union vote they are going to close the petrochemicals side. They talked about finding a buyer but they were not very hopeful because it's a distressed business. The assets on the chemicals side probably will opening in the short term but further out it's not clear.

"Despite the union activity I still took it as a shock the way it has been done so abruptly. It's as if it was preordained. I have put a lot of faith in the union and I still hope they can do something about it but they may have acted too quickly.

"Everyone will be affected: people contractually obliged working here and businesses associated with the place. The way Calum MacLean walked in you could tell what he was going to say before he started speaking. He was ashen faced." Asked if there was any hope Ineos might negotiate: "I certainly hope so.