Merryn's Blog

The bad news about the Grangemouth plant ‘rescue’

Ineos’s troubled Grangemouth petrochemical plant is to join the UK’s taxpayer-funded job creation scheme.

I went on Brian's Big Debate on BBC Scotland earlier today. The main discussion, as you could probably have guessed, focused on Grangemouth. If you don't know the story so far you can read it here.

This morning it was announced that the petrochemical plant is to stay open, after the union capitulated and agreed to sign up for the original deal offered by the plant's management.

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The panel was thrilled. Everyone started their comments by saying that we should "celebrate" the fact that thousands of jobs have been "saved" before moving on to make comments with different degrees of pointlessness on the importance of group decisions and co-operation, before linking it either to the importance of Scottish independence or the importance of the union.

What wasn't mentioned, however, is that the saving of Grangemouth is classic of British industrial policy. The petrochemicals business is loss making. It is working at a mere 60% of capacity. That's because, thanks to the fall off in the supply of North Sea gas, it isn't getting the feedstock (raw materials) it needs from the neighbouring refinery.

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Its survival plan, beyond normalising pay conditions for its workers, is to spend £300m to build facilities to import cheap feedstock (derived from shale gas) from the US. That might work, and it might not (if the feedstock is so much cheaper in the US why not process it there?)

But let's look at what Ineos, Grangemouth's owners, needed to push them to make this investment. They needed to be sure that the workforce would be sharing the burden (no more final salary pensions here) and they needed to see commitment from the government too.

They aren't going to make this investment alone. The taxpayer is going to help out. There will be £9m in direct grants and, as part of our new industrial policy, a £125m loan guarantee facility.

That people aren't losing their jobs is good news. That the plant will still be there is good news. That Grangemouth has just become, even in a small way, part of the UK's subsidised job creation scheme isn't quite so good.

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