23 Oct 2013

Grangemouth plant to shut following union dispute

As the owners of the Grangemouth petro-chemical plant near Falkirk announce that it will close, the UK and Scottish governments say they hope a way can be found to keep it open.

The petro-chemical plant, Scoland’s biggest industrial site, employs 800 people. The oil refinery there, which was shut last week and supplies fuel to Scotland, the north of England and Northern Ireland, could re-open. If it does not, more employees will lose their jobs and petrol prices are likely to rise.

The closure decision follows the rejection of a survival plan that was put to employees. The Unite union said around 680 of the site’s 1,370-strong workforce 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 end of the final salary pension scheme.

Energy Secretary Ed Davey told the Commons: “The government does not under-estimate the plant’s importance both to the local community and to the Scottish economy.

“”Throughout this disruption, fuel suppliers are continuing to be delivered as usual. Moreover, my department has been working closely with industry and the Scottish government to put robust contingency plans in place to ensure that supplies of road fuels, aviation fuels and heating oils will continue to be available to Scottish consumers and continue to fuel the Scottish economy. “

Mr Davey said the UK government would continue dialogue with both sides in the dispute, as well as the Scottish government, in the hope it could remain open “if at all possible”.

Emergency

Scotland’s First Minister Alex Salmond said he was convening an emergency cabinet meeting to discuss the situation, adding: “In preparing for this extremely difficult position we have been pursuing the contingency of potential buyers. We will now be actively exploring this as the main option as a matter of urgency.

Owner Ineos said in a statement: “The company made it clear that rejection of change would result in closure. Regrettably, the union advised union members to reject any form of change.

“The outcome of the employee vote on the company’s survival plan was a 50/50 split. Within this, almost all of the administrative staff voted for the company’s plan but a large majority of shop floor employees voted to reject it.”

Scottish industry

Grangemouth is Scotland's biggest industrial site and is thought to be worth £1bn to the country's economy.

Around 800 jobs are directly threatened by the closure of the petro-chemical plant and hundreds more could go if the refinery does not re-open. These numbers do not include contractors' jobs or the likely effect on people working elsewhere whose jobs are reliant on Grangemouth.

Professor David Bell, an economist at Stirling University, told Channel 4 News: "There are lots of industries that use output from Grangemouth. They will be affected, but only insofar as they will have to pay higher costs to buy chemicals from other sites in the UK and overseas. It's not as if the supply of plastics will stop, but they will have to look for new sources."

The closure of the refinery would be expected to lead to higher petrol prices. "A lot of North Sea oil is refined at Grangemouth," said Porf Bell. "They will have to refine it elsewhere, which adds to costs for North Sea oil companies. I would have thought there would be higher costs taking fuel to distribution points in Scotland. That would push up prices, but not massively."

Prof Bell said that with the upcoming independence referendum, "both governments are going to take it very seriously". He said the governments' options were limited. "With BP in charge, it would have been easier to put leverage on the company, but with a private company based in Switzerland, lines of communication are nort going to be as strong."

The company said the liquidation process would begin in a week, while a decision on whether to restart production at the oil refinery will depend on the removal of the threat of further industrial action.

Ineos 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 makes.

‘Russian roulette’

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 petro-chemical complex.

Grahame Smith, general secretary of the Scottish Trades Union Congress, said: “The behaviour of Ineos is simply disgusting and it reveals the true nature of a feral private equity concern that clearly believes it has no social obligations whatsoever.

“When the stability of the economy was threatened by the failure of RBS and HBOS, government was quick to act. Now when the stability of the Scottish economy is threatened by the industrial blackmail tactics of Ineos, government must again find the will to act.”

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.

Bitter dispute

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

He was suspended, then reinstated, and is facing 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 will close without fresh 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, is losing £10m a month. Ineos said it is ready to invest £300m in Grangemouth if workers agree to the new terms and conditions.