£300m survival plan for Grangemouth

Grangemouth oil refinery: Work to rule plan. Picture: Getty

Grangemouth Petrochemicals owner Ineos has warned that the plant, which employs more than 1,000 people, will run out of raw materials and close by 2017 at the latest if the “survival plan” is not agreed.

Ineos has asked the Scottish and UK governments for grants and loan guarantees totalling £150m to support the new venture, but says employees and unions must also play their part.

It wants workers, who earn an average of £55,000 and usually retire at 57, to agree to the closure of the generous final salary pension scheme.

The plant’s chairman, Calum MacLean, said: “These changes will transform our business and ensure the long-term future of the site. But everyone must understand there is no plan B.”

Grangemouth has been losing more than £10m a month and has a pension deficit of £200m. Ineos says it has made “huge losses” on both the petrochemicals factory and the adjacent refinery, and change is essential.

The company has invested

£1 billion in the facility and has indicated it is willing to plough in a further £300m to build a gas terminal to bring in ethane from the United States. It is carrying out an identical scheme at a plant in Norway, as the North Sea gases which provide its raw materials are running out.

Mr MacLean said: “We’re very lucky that at this time there is an alternative feedstock available, otherwise we would be having a very different conversation, about closure.”

He said the plan, if adopted, could return the chemicals operation to profit by 2016.

But he added: “We need to address the cost base. Unless we get it under control, even if we invest this money we will still have a loss-making business.”

The 1,700-acre site at Grangemouth is said to make more than a million tonnes of chemical products annually in various plants, while the refinery has an annual capacity of 10m tonnes.

Ineos says Grangemouth technicians typically earn a base salary of £40,000 to £43,000. Shift allowances and a bonus take total pay to about £55,000, compared with the average wage in Scotland of about £26,000.

The company says pension costs add an “unsustainable” 65 per cent to salary costs, taking the price of employing a technician to about £90,000 a year.

The changes, which applies to about 500 refinery workers as well as Ineos’ 800 staff at the chemical works, would introduce a money purchase pension scheme for all employees and see the final salary scheme closed to all workers. Mr MacLean said job losses would be few, while changes to pay would apply only to new employees.

The chemicals plant and refinery also employ about 1,300 contractors, who Ineos says are generally on lower wages.

Unions at Grangemouth have been fiercely protective of workers’ rights in the past and recently accused bosses of “scare tactics” when closure of the chemicals plant was mooted last month.

Workers staged a two-day strike in 2008 over proposed pensions changes, crippling the refinery and triggering panic-buying of fuel. It was said to be the most costly industrial action in British history.

Last week, workers voted for industrial action in a dispute over the treatment of a union official after he was involved in the Labour Party’s Falkirk candidate-selection row, but agreed not to go on strike ahead of an internal company report.

Yesterday, however, Unite gave Ineos management seven days’ notice of industrial action, saying the issue of the official’s “unfair treatment” must be

addressed.