UK Coal warns five pits are at risk after Government scraps subsidies

UK Coal, the owner of the English coalfields, warned yesterday that five of its 12 remaining deep mines could close with the loss of 2,500 jobs following the Government's decision not to renew a subsidy scheme for the industry.

The warning came as UK Coal plunged to a £26.5m loss for last year compared with a profit of £17.8m in 2000 despite receiving £21.7m in subsidies and enjoying higher coal prices and increased production levels.

The three pits most at risk are Riccall, Stillingfleet and Wistow, which make up the Selby complex in Yorkshire and employ 1,800 miners. Last year they made a combined loss of £35m. The Ellington colliery in Northumberland and Clipstone in Nottinghamshire, which lost a total of £8.5m, are also thought to be at risk.

Gordon McPhie, UK Coal's chief executive, said that he had recently applied for an additional £20m in subsidy under the Coal Operating Aid scheme, which is due to run out in July, but had been turned down by the Energy Minister, Brian Wilson.

"In those circumstances, the only option we have is to run the pits economically and if we can't turn some of the loss makers around we will have to close them."

UK Coal has a total workforce of 7,200 of which about 5,500 are employed in its remaining deep mines. The company has already announced that the Prince of Wales colliery in West Yorkshire, Britain's oldest pit, will close this summer because of geological problems and mounting losses.

The closure of the Prince of Wales colliery has resulted in a one-off £15.8m charge. The results were also affected by the fact that UK Coal made a £8m profit the previous year by selling coal already in stock. Coal production increased to 19.6 million tonnes – the first time the company has achieved a year-on-year improvement in output since it bought the English coalfields in 1995.

A £25m loss in UK Coal's deep mines was partially offset by a £17.3m profit from opencast operations. Rental income from the company's property portfolio also rose to £3.9m. The dividend for the year was held at 10p.