Government faces demand for £300m to protect 133,000 jobs

A massive chemicals plant in the North of England will shut in a move that could cost 133,000 jobs unless the Government agrees to hand out £300m in state aid.

The Government must decide tomorrow whether to agree to an application for grant funding from Ineos Chlor for its chlorine plant in Runcorn, Cheshire. Ineos Chlor, a privately owned company that bought the factory from ICI last year, says the site needs massive investment to survive. Its new owner may also sue ICI for £65m, alleging the chemicals and paints giant "misled" Ineos about the state of the Runcorn site, a claim which ICI denies.

The company says it needs £635m to modernise the plant and has applied for a regional assistance grant under which the Government can match investment by the company with a grant of a similar size.

Executives from Ineos will learn at a meeting with Patricia Hewitt, the secretary of state for trade and industry, whether they have been successful. The two sides have been in talks for several months. The company says it faces a £360m shortfall in funding needed to bring the plant up to standard. "If it cannot get the money then the company sees that the prognosis [for the plant] is not good," said a spokesman. "It is haemorrhaging money." The Runcorn plant employs 1,200 people and produces four-fifths of the UK's supply of chlorine, which is a vital ingredient in many industrial processes and for water purification.

As chlorine – a highly dangerous chemical – is hard to import, Ineos believes the ramifications of closure of the plant would be much wider. A report commissioned by Ineos by LECG, an economics consultancy, found that closure of Runcorn would threaten 133,000 jobs, including 45,000 in the UK chemicals industry and a further 88,000 in allied businesses.

"Ultimately we would foresee the closure of large sections of the UK chemicals industry," LECG's report, which was leaked over the weekend, said.

Ineos is also likely to remind Ms Hewitt of her high-profile support for manufacturing industry at the Labour party conference when she said the Government would do everything "in our power" to save jobs that are under threat.

The deal with ICI made Ineos, which last year announced it was making 450 out of the 1,680 employees redundant, the second largest manufacturer of chlorine in the UK.

A spokesman for the Department of Trade and Industry said it could not comment on specific companies.

Ineos is also pursuing a claim for compensation from ICI, from which it bought the Runcorn site as part of a £325m deal involving a number of plants. It is in negotiations with ICI, which has a 15 per cent stake in Ineos, but is preparing grounds for a legal claim against the giant company. An Ineos spokesman said the company had carried out the process of "due diligence" ahead of the sale but was not able to inspect "every foot of piping. When they actually got into the plant they realised that they had been misled," he said.

A spokesman for ICI said it believed Ineos was "well aware" of the state of the factory. "ICI are confident that all of the relevant information was made available at the time of purchase," he said.