Grangemouth refinery closure to hit 2,800 jobs as 'hammer blow' decision a 'significant economic shock'

The decision had been touted for months, but despite calls for the UK and Scottish governments to rescue the Grangemouth facility, Petroineos will press ahead with shutting the site in the second quarter of 2025.

A total of 400 direct jobs at the plant will go over the next two years. But a new report by PwC, on behalf of Scottish Enterprise, has found as many as 2,800 jobs are supported by the refinery, including wider supply chain opportunities.

The research adds “the economic contribution” of the refinery, its supply chain and employee spending it induces was “estimated to be £403.6 million” in 2023.

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Scotland’s two government’s have committed £100m, including the £80m Falkirk and Grangemouth Growth Deal, to support the development of low-carbon opportunities.

The £1.5m Project Willow study has identified a shortlist of three credible options to begin building a new long-term industry at the refinery site, including low carbon hydrogen, clean eFuels and sustainable aviation fuels.

Petroineos’s plans to transform the facility into an import terminal requires significantly fewer people to operate than a refinery, with the company poised to enter a formal consultation process this month with the site’s 475 employees, with 400 roles set to go over the next two years.

First Minister John Swinney branded the decision a “significant economic shock” and issued a stark warning that it “will raise significant economic implications for Scotland”.

Hisashi Kuboyama, from the Federation of Small Businesses, warned “the knock-on effect on the supply chain will have an impact on numerous small businesses across the length and breadth of the country, putting many more jobs than the 400 on-site at risk”.

Mr Swinney said there was “a long way to go to make sure the workforce at Grangemouth are supported through what I recognise to be an extremely difficult and challenging period”.

He added: “We’ve got to remain open to identifying specific support that is necessary to assist the community with what I recognise to be a very significant economy impact”.

The Scottish Government first vowed to publish a just transition plan for Grangemouth in 2022, as part of Nicola Sturgeon’s Programme for Government. But the vision is yet to materialise and will not be made public until the end of this year.

Asked by The Scotsman if the blueprint would come too late for the impacted workers, Mr Swinney said there were “practical steps” being taken through Project Willow that would help inform solutions for Grangemouth.

He said: “I don’t think the just transition plan has any material impact with the issues we are wrestling with today because we’ve been focusing, for some time, on the opportunities for the Grangemouth site.”

Scottish Labour deputy leader Jackie Baillie said “for the workforce, their families and the wider community”, it will be “a time of great anxiety”.

Scottish Conservative Douglas Ross told MSPs the announcement was a “devastating blow”.

UK energy secretary Ed Miliband said the decision was “deeply disappointing”. He said: “We will stand with the workforce in these difficult times. That is why we are announcing a package of investment to help the workforce find good, alternative jobs, invest in the community and serve a viable industrial future for the Grangemouth site, with potential for future support from the national wealth fund.

“Unlike in the past, the government is working in lockstep with the Scottish Government across every front. Workers and their families should be in no doubt this is a government that stands with workers, trade unions, and businesses to fight for jobs and investment in Scotland.”

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SNP MSP for Falkirk East, Michelle Thomson, claimed she has “been working with a third party that hopes to purchase the refinery in its entirety”. But Petroineos said it had no knowledge of any takeover bid, which would be incredibly complicated and likely take years.

Union bosses have hit out over a lack of support to workers from politicians and Petroineos.

Unite general secretary Sharon Graham said the “dedicated workforce” at Grangemouth had been “let down by Petroineos and by the politicians in Westminster and Holyrood who have failed to guarantee production until alternative jobs are in place”.

She said: “The government must put its money where its mouth is to ensure the jobs are safeguarded. This is the only refinery left in Scotland and it must remain.”

STUC general secretary Roz Foyer said: “This is a heart-breaking hammer blow for the workforce and their communities.

“Workers have, yet again, been despicably failed by politicians and governments who have been utterly inadequate in persuading Petroineos to expand the lifespan of the refinery.

“It is the job of governments to be ahead of the curve, deliver strategy and smooth the course of the transition. In all these respects, both Scottish and UK governments have failed entirely. “

Petroineos said that due to its size and configuration, Grangemouth incurs high levels of capital costs each year just to maintain its licence to operate. This annual cost on essential planned maintenance and running repairs has been consistently higher than the company’s earnings over the past decade.

Frank Demay, chief executive officer at Petroineos Refining, said: “The energy transition is happening now and it is happening here. Demand for key fuels we produce at Grangemouth has already started to decline and, with a ban on new petrol and diesel cars due to come into force within the next decade, we foresee that the market for those fuels will shrink further.

“That reality, aligned with the cost of maintaining a refinery built half a century ago, means we are exploring ways to adapt our business.

“The action we are taking to create an import terminal will safeguard fuel supply for Scotland. We currently expect Grangemouth to be ready to operate as a national distribution hub for finished fuels in Q2 next year.”

Mr Demay added: “Unfortunately, a terminal would require only around one-fifth of the current refinery workforce. Therefore we will soon enter an information and consultation process with representatives of our employees to discuss the proposals.

“We have already agreed to move from the UK statutory minimum redundancy terms to an 18-month package and if plans proceed, we intend to do everything we can to reduce the impact on our people. We will, of course, be seeking to minimise compulsory redundancies as far as possible.”