AS LAST-MINUTE talks sputter on to find a compromise, the row over a Scottish industrial landmark revives memories of the bad old days of the decline of Britain’s heavy industries: a huge unprofitable complex threatened with closure; hard-headed management insisting on workers’ concessions; a recalcitrant union bent on proving its power, in the process threatening its members’ livelihoods. But the Grangemouth petrochemical and refinery complex in Scotland is also caught in currents as dangerous as the waters of the great River Forth on which it sits, as a vote looms on Scottish independence.
The Unite union, the spiritual heir of the old militant Transport and General Workers' Union which wrecked the British car industry 40 years ago, called a strike over management’s treatment of a militant shop steward. Management shut down the petrochemical works and went over the union’s head to ask workers to vote on new conditions involving closure of the generous defined-benefit pension scheme the present owners—Ineos, one of Britain’s largest private companies—inherited from BP, the previous owner. Urged on by their union, over half the workers voted against, and management said the plant would close permanently. On October 24th a panicked union leadership caved in and offered concessions in the hope of winning a stay of execution.
The business realities are a familiar tale of globalisation overtaking outdated European facilities. The oil industry has been backing out of petrochemicals and refining for some years because margins are much thinner than in exploration and production of crude oil. Small, lean specialist refiners such as Ineos, relying on cheap loans to buy distressed assets like Grangemouth, have been taking their place. But even these new owners are now feeling squeezed.
Grangemouth petrochemical works needs hundreds of millions of pounds in investment to take in cheaper liquefied natural gas from America as North Sea supplies dwindle. Without lower labour costs that would not be economic, hence the Ineos ultimatum. Closure means the disappearance of 800 jobs immediately. But worse looms: without the chemical works the refinery (jointly owned by Ineos and PetroChina) loses a major customer and itself becomes uneconomic. Like refineries all over Europe, it already suffers from a decline in petrol consumption, surplus capacity and a tilt to diesel, which many older refineries are not geared up to produce. Newer refineries in the Middle East, India and China are taking over; increasingly hydrocarbons are shipped around the world as refined oil products rather than crude. Contrary to the scare stories, Britain can simply import more petrol as local refineries close (two already have); it already imports most of its diesel.
