Last updated: October 23, 2013 6:03 pm

UK scrambles to find buyer for Grangemouth petrochemical plant

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Grangemouth dispute©PA

The UK government is seeking a buyer for Grangemouth after Ineos, the chemical company, decided to close Scotland’s largest petrochemical plant.

The decision, against the backdrop of continuing uncertainty over the neighbouring refinery, follows a weeks-long dispute between the company and the Unite union over pay, conditions and union representation.

Ed Davey, energy secretary, told MPs he had asked the business secretary and UKTI, the UK’s trade and investment body, to try to find another company to invest in the plant, which employs more than 800.

“We will be using all our efforts through the [business] department and UKTI to assist should we need to have a buyer for the petrochemical plant,” said Mr Davey in an address to parliament.

Officially, ministers are urging Ineos and the Unite union to return to the negotiating table to talk about how to keep open the plant, 15 miles northwest of Edinburgh.

But privately, senior members of the government admit Ineos is not likely to do so and the plant can only be saved with new investors. One minister said: “It’s all about finding a buyer now.”

Alistair Carmichael, the Scottish secretary, has called for a new owner to be found, backing an effort begun by Scottish leaders.

“If there is a workable proposition here, there must be a buyer out there for it somewhere,” Mr Carmichael said.

An emergency meeting of the Scottish cabinet agreed that there should be “one further attempt” to get agreement between Ineos and Unite to save the petrochemical plant – and if that failed, to press forward with efforts to find an alternative owner.

“We can’t accept the removal of Grangemouth from Scotland’s industrial infrastructure,” said Alex Salmond, Scotland’s first minister.

Ineos announced the news on Wednesday morning, saying half of Grangemouth employees, and a large majority of shop floor workers, had rejected its demand for changes to pay, pension and union representation.

“Shareholders reached the conclusion they could not see a future for Grangemouth without change and therefore could no longer continue to fund the business,” the company said.

We can’t accept the removal of Grangemouth from Scotland’s industrial infrastructure

- Alex Salmond, Scotland’s first minister

The company proposal included ending final salary pensions, a 2014-16 pay freeze, a removal of a bonus up to 2016 and a reduced shift allowance.

Ineos claims the plant is losing some £10m a month and needs investment of £300m.

Mr Davey said he was “saddened” to hear of the decision and said it was “regrettable that both parties have not managed to negotiate a fair and equitable settlement that delivers a viable business model for the plant”.

The Scottish Trades Union Congress denounced the closure as the “vindictive whim of an unaccountable billionaire”, in reference to Jim Ratcliffe, Ineos chairman, and said government should be willing to step in.

“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,” Grahame Smith, STUC general secretary said in an statement.

Alistair Darling, Labour’s former chancellor, said Ineos’ behaviour was “akin to the industrial relations of the 1970s”.

Ineos says its joint venture with PetroChina would now decide whether to restart the refinery, a decision that would be “primarily dependent on the removal of the threat of further industrial action”.

PetroChina has not commented in detail on the future of the plant, which plays a crucial role in petrol supply for Scotland and the rest of the UK, but added on Wednesday it was “aware of the situation”.

“We hope a consensus can be reached between Ineos, the Unite union and other parties,” the Chinese company said.

This is a sad day for Scotland, for the Scottish economy, for the company itself and for the workforce

- Simon Marsh, Chemical Industries Association

Nicola Sturgeon, Scotland’s deputy first minister, said the closure was a “very, very serious” blow to the area and wider economy, but that the Scottish government still believed the complex was viable and would continue efforts to secure the future of the petrochemicals plants.

The refinery at Grangemouth, which has been shut down since last week, supplies 85 per cent of the fuel consumed from Carlisle to Aberdeen. But Mr Davey said there was no present risk of disruption to supplies.

Simon Marsh, employment director at the Chemical Industries Association, said closure of the petrochemical plant would have an effect on many other companies.

“This is a sad day for Scotland, for the Scottish economy, for the company itself and for the workforce,” Mr Marsh said.

Scotland’s government has launched a search for buyers of the Grangemouth refinery. But one industry analyst said the petrochemicals plant was not internationally competitive and was “very unlikely” to attract interest.

The plant suffered a blow this month with news that a key customer, an Ineos facility at Saltend in Hull, was closing. Ineos said at the time that low-cost imports to Europe had made the Saltend closure inevitable.

An indefinite shutdown of both the refinery and petrochemical plant at Grangemouth could cost the Scottish economy as much as 2 per cent of gross domestic product.

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