Lessons from Grangemouth: how the UK should manage industrial transition

The closure of Grangemouth oil refinery in Scotland this year has been more than just a local setback, it has become a political football and a warning on the need to plan for industrial change.

What could have been a carefully managed industrial transition, protecting skilled jobs, securing the future of the industrial cluster at Grangemouth – which has seen other closures too – helping to revitalise the local community, has instead become a scramble.

Increasingly detailed plans for the site are now emerging and hundreds of millions of pounds of funding have been made available by the Scottish and UK governments.

The first of, hopefully, a new series of plants has just been announced. But, in the meantime, over 400 workers have lost their jobs. Questions have been raised in the Scottish Parliament around the planning that had been done for this kind of situation and whether it would have been allowed to unfold in the same way in England, and opponents of climate action are blaming the closure on net zero.

While this may be the first government in decades to commit wholeheartedly to an industrial strategy, the version published in the summer focuses largely on the potential for new growth in sectors like AI and clean energy. A parallel strategy is needed to map where industries are waning and work with local communities to co-create new local economies.

Change is inevitable
As we set out in a briefing published today, Grangemouth didn’t fail because of climate policy or net zero targets. It failed because it was uncompetitive and there was no long term government strategy to steer what happened next. Petroineos, the operator of the refinery, had long warned that its age and design made it costly to run. Newer, more efficient refineries in Asia and the Middle East have outperformed it.

We see the same story in other industries. Employment and output in the steel sector, for instance, has been falling since the 1970s, well before net zero became a goal. There too, investment was put off for decades and successive governments kicked the can down the road, noting the importance of the steel industry to local economies but never quite making the bold decisions on whether, or how to, step in.

It is critical that competitiveness and decarbonisation are seen as two sides of the same coin. Industrial equipment lasts decades. A refinery, steel plant or chemical facility that isn’t planning for the next phase of industrial demand – and a country that hasn’t built the right policy environment for that next phase – isn’t futureproofed and won’t attract investors.

The government shouldn’t just chase the next big thing
Grangemouth still has valuable assets: a deep water port, skilled industrial labour, pipelines to airports across Scotland and access to locally generated renewable power. It should have a thriving future in a new lower carbon economy. But mapping exactly what that will look takes careful planning and more than just chunky grants.

As the closure of the refinery looked increasingly inevitable last year, the UK and Scottish governments and Petroineos funded Project Willow, an investigation by PwC into alternatives for the Grangemouth site. Published in March 2025, it highlighted nine possible low carbon industries that could provide 1,000 or more jobs across the site. However, the earliest construction foreseen on any of these was 2028. More worrying is that many are either suboptimal from an environmental perspective, suggesting they might have a limited lifespan, or would require new government incentives to create a viable market.

The list includes bio-based road fuels, which are likely to be rapidly replaced by electric road transport, and there are better uses of limited biomass than powering vehicles. A new plant in Grangemouth will be making this, although reports suggest it was established separate from government processes.

At the other end of the spectrum are cleaner chemical processes, needed to move beyond the fossil resources used to make 90 per cent of today’s chemicals. But alternatives are expensive and unlikely to take off unless the government steps in.

Policymakers need to think about how they support innovation in these areas and bring new markets to life. Capital investment in plants alone won’t be enough if the products remain unviable. But that will take time.

Early action buys time, and options
It would be helpful to distinguish between ‘no regrets’ options that make sense now and longer term higher risk opportunities that might need more support.

The no regret options might not be glamorous, but they create jobs, resilience and the foundations for further industries. At Grangemouth, these might include expanding anaerobic digestion (AD) using local biomass, scaling up green hydrogen for use initially as a fuel, piloting carbon capture on the site for reuse and local renewable power for industrial use. These are valuable in their own right but carbon derived from capture or AD could also be used alongside hydrogen to create a variety of fossil-free fuels and chemicals in future.

Developing these options won’t be quick.  And perhaps the hardest trade off is around acting quickly versus doing the right thing. It’s hard to judge those trade offs in a rush. Having plans in place before Petroineos started speaking publicly about closure, would have allowed those considerations to be made in a more timely way to soften the blow of closure, for instance through retraining programmes. Instead, a slow burn structural challenge has become a sudden crisis.

Planning change with communities is essential
We looked at the managed decline of coal mining in the Ruhr in Germany – largely seen to be a successful transition – and steel industry decarbonisation in Sweden and found that early action with worker and community engagement was central. In the Ruhr, a structured partnership between the government, labour unions and industry lasted years and prioritised retraining, economic diversification and social dialogue.

Communities in areas like Grangemouth should be included in decisions even if that might involve uncomfortable conversations. But people rightly cannot tolerate the sense that change is being imposed without consultation. Project Willow prompted suspicion as it was conducted largely behind closed doors.

The UK needs a new blueprint for transition
Grangemouth isn’t the first industrial site to face closure or significant change and won’t be the last. The car industry and boiler manufacturers are two areas undergoing major shifts. A blueprint is needed to foresee, plan for and manage these industrial changes.

The Grangemouth story is still unfolding but it doesn’t need to be one of decline. It could be an example of reindustrialisation, as a thriving hub for clean fuels and green chemicals. For now, it stands as a warning of the need to act early.