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Comment: Grangemouth stakes too high for row to go on

Terry Murden. Picture: Phil Wilkinson

Terry Murden. Picture: Phil Wilkinson

  • by TERRY MURDEN
 

NO-ONE should underestimate the potential impact of the dispute which this week threatens to engulf Scotland’s biggest manufacturing plant.

Industrial company Ineos wants to restructure its operations and costs at its loss-making Grangemouth petrochemicals facility in the face of a disbelieving trade union which accuses the company of playing a dangerous game with its members’ livelihoods.

There is a touch of battles of old being fought: a tough-talking management against a stubborn trade union, with neither side willing to give ground. The scrap is usually messy, the outcome unsatisfactory for both sides.

A big factor here is that the dispute is being fought on two levels. Unite’s industrial action, kicking off tomorrow with a work to rule, is being called in defence of the union’s convener at the plant, Stephen Deans, who is facing potential disciplinary action over his use of company time and resources to work on the Falkirk by-election.

The company is more concerned with the bigger picture: a £150 million annual loss over four years, dwindling supplies of its basic raw material, and a pension fund that is £200m in deficit. Without reform, the plant faces closure.

Yet a strike remains a possibility, and that would prove disastrous. The last strike at the plant cost the company £100m in lost output and costs associated with shutting it down and starting it up again. That process takes six weeks.

Make no mistake, Scotland needs this plant to stay open. It supplies 85 per cent of the country’s fuel. Beyond that, chemicals is a key industry. According to Scottish Enterprise, it accounts for a quarter of Scottish manufacturing by turnover, at £9.3 billion a year. About 200 organisations employ 14,000 people, with a further 70,000 jobs along the services chain.

As a sector, chemical sciences is Scotland’s second biggest exporter, with exports worth £3.7bn. It also has the second highest gross value added per employee of any industry in Scotland, at £161,000. The sector’s £250m annual research and development spend accounts for 40 per cent of all industrial R&D in Scotland.

Ineos needs to spend £300m on Grangemouth, and on these figures it would be hugely surprising if the Scottish Government refused its request for a £9m grant and Westminster declined to provide a guarantee to enable the company to borrow money from the bank.

The union may think it is being fobbed off with false numbers and attempts to break them, but sources at the company tell me that the threat of closure in 2017 is not a game of bluff. There is a need for someone to bang heads together and force all concerned to accept that no-one wins from a continuing stand-off.

Investors bet on Twitter profits

The timing last week of the flotation plans for the Royal Mail and Twitter creates a symmetrical conundrum for investors who are faced with supporting two sides of a communications industry, one steeped in history and tradition, the other a newbie with a fast-growing user base.

On the face of it, the figures point in one direction. The Royal Mail has a turnover of £9 billion and made a profit last year of £400 million. Its shares are likely to be priced at the top of their range and produce an instant profit. Demand has strengthened on the back of a promised yield as high as 7.7 per cent.

In just seven years Twitter has gathered 215 million worldwide users and revenue of just under £200m but it has never made a profit. A dividend for shareholders could be years away. Yet when it floats on 8 November Twitter is likely to be valued at up to £10bn, three times the value of Royal Mail.

The markets are clearly setting past records aside and investing in the future. More specifically, they are buying into the potential of Twitter to transform its balance sheet over time.

It has the advantage of earning 65 per cent of its revenues from mobile advertising, a shortcoming that the social networking site Facebook has been forced to correct.

Twitter will come to market with double the revenue of its preferred model, the networking site LinkedIn when it floated two years ago. Pre-flotation, LinkedIn was profitable and its active users were growing at a faster rate than Twitter’s.

But it is the post-flotation experience of LinkedIn that attracts Twitter and its supporters. Its revenue per user has risen threefold and the share price has soared fivefold.

Twitter: @TerryMurden1

 

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