It WAS quite obviously a coincidence that Chief Secretary to the Treasury Danny Alexander announced one of the biggest boosts for Scottish manufacturing in recent times on the same day that First Minister Alex Salmond was in Liverpool for his final rallying cry on independence south of the Border.
The £230 million loan guarantee to chemicals firm Ineos to build a shale gas terminal at Grangemouth effectively means that the UK government will underwrite the company as it seeks to raise funds through a public bond. It follows an earlier £9m grant from the Scottish Government, which pledged to do whatever was required to keep the plant open when a dispute last year threatened its future.
Last October, in a commentary on the dispute, I wrote: “It would be hugely surprising if … Westminster declined to provide a guarantee to enable the company to borrow money.”
It has taken a little longer for the money to come through than perhaps some might have expected, but we are, after all, in the midst of a political campaign and never let it be said that timing and opportunism played no part in such announcements.
Aside from the politics, this agreement underpins Ineos owner Jim Ratcliffe’s insistence that the plant’s future required some major changes in how it operates. The dispute last year was a complex combination of pensions rights, the treatment of an employee and Grangemouth’s viability unless it achieved an alternative source of raw material as gas supplies from the North Sea begin to run out.
It was losing some £10m a month and was saddled with a £200m pension deficit. Some harsh warnings from Ratcliffe, who threatened to pull the plug, together with some tough negotiations involving the company and the Scottish and Westminster governments managed to avert such a devastating outcome. With the dispute behind it and the money in place, management can now focus on reversing its losses and turning a profit by 2016.
Ratcliffe is correct in stating the importance of Grangemouth to the Scottish economy. It supplies 85 per cent of the country’s fuel. As a sector, chemical sciences is Scotland’s second-biggest exporter, with exports worth £3.7 billion. Its £250m annual research and development spend accounts for 40 per cent of all industrial R&D in Scotland.
Work now begins on building the terminal which will handle supplies of cheaper and more plentiful shale gas from the US. An interesting aside, here will be the extent to which it adds pressure on the UK authorities to push ahead with shale gas exploration in Britain.