Effects of the Grangemouth oil refinery strike

by The Times 100 on Wednesday 7th May, 2008

Effects of the Grangemouth oil refinery strike

There are many external influences that can affect the running of any business. The Grangemouth strike, threatening as it does the supplies of fuel is one such, but is itself the result of actions taken some time ago by government.

Workers at Grangemouth (members of the Unite union) have benefited from a generous non-contributory pension scheme which they are now fighting to keep. Ineos, the highly profitable company which acquired Grangemouth from BP three years ago, wants to wind up its current final-salary scheme and ask existing members to contribute 6 per cent of their earnings towards a new scheme, phased in over the next six years. New arrangements will be made for future new employees. Currently Ineos pays as much as a quarter of its entire staff salary at Grangemouth to retired workers who no longer work there. This could rise to one third of the total salary bill if there is no change and the pattern of early retirement continues (The Times, 28 April 2008).

The strike has also closed BP's key Forties oil pipeline, which provides 30% of the UK's daily out output from the North Sea. Extra fuel supplies are being brought in by tanker. Of seven heading for Scotland, two have already arrived in the Forth and a third, carrying 3,000 tonnes of diesel and kerosene arrived off Aberdeen on Sunday evening (BBC News, 28 April 2008).

Pensions are politically sensitive issues, particularly for Prime Minister Brown. In 1997, his first act as Chancellor was to take around £5 billion a year in tax from pension funds, a stealth tax which led to the old final-salary system being widely discarded as too expensive, and caused the British pensions crisis that lies behind the Grangemouth dispute (The Times, 28 April 2008).

The actions of the government and the effects of the strike have an effect on business in general. Look at the Times 100 case studies on Aegon and McCain to see how businesses manage the effects of external influences.

  1. AEGON in the UK is part of the AEGON Group, one of the world's largest life insurance and pensions companies. AEGON owns pensions, life insurance, asset management and adviser businesses in the UK. The case study illustrates the success that embracing and pursuing change has brought to AEGON in the UK.
  2. McCain recognises that the external environment today is changing fast. This case study shows how McCain needs to identify changes in the external environment and then rise to the challenges posed by change. The external environment consists of everything outside the business.

Sources:

The Times Online – Grangemouth: the real culprit, 28 April 2008

The Times Online – Grangemouth: oil and troubled waters, 28 April 2008

BBC News – Ships bring extra oil amid strike, 28 April 2008

The Times 100 Edition 12 Case Studies – Aegon, Embracing and pursuing change

The Times 100 Edition 12 Case Studies – McCain, How McCain responds to changes in the external environment

Potential Study Questions:

  • How does government policy affect businesses?
  • Assess the effects on different types of businesses of a fuel shortage due to a prolonged fuel strike, and the knock-on effect for consumers.
  • A firm may offer older workers early retirement if it is seeking to reduce its labour force. What other methods might a business use to reduce workforce numbers?

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