Kellingley colliery, one of the country’s last deep-pit mines, has been granted a stay of execution after the Government agreed a funding package to keep it open for another 18 months.
However the country’s historical deep-pit coal mining industry is now effectively on the brink of extinction after ministers decided there was no case for investment to keep Kellingley open in the long term.
Ministers have agreed to a £10m loan, alongside an additional £10m from the private sector, to support the “managed closure” of the mines at Kellingley in North Yorkshire and Thoresby in Nottinghamshire.
Together the sites, operated by Britain’s largest coal producer, UK Coal, employ 1,300 people. They are now to be wound down by autumn 2015.
The Government backing spares the company the prospect of immediate insolvency which would have cost the Treasury “significant losses and liabilities” from redundancies and unpaid taxes.
In a written statement to MPs, energy minister Michael Fallon said: “The taxpayer is better served by supporting a managed closure of the mines.
“However, deep coal mining remains an inherently risky business. There is no value for money case for a level of investment that would keep the deep mines open beyond this managed wind-down period to autumn 2015.
“Private sector investors who wish to put in the substantial investment that would be needed to maintain the mines beyond autumn 2015 without government support remain free to do so.”
He said a “rapid response service” would be available to help employees try to find new work and retraining.
Mr Fallon said directors of UK Coal had approached the Government at the end of January to report that a falling coal price, exchange rates and other factors meant that “the viability of the business was potentially in doubt”.
It is understood that private sector investment will come from rival mining group Hargreaves Services and Harworth Estates, landlord of the two mines.
UK Coal supplies fuel to power stations providing four per cent of the UK’s electricity needs. Coal accounted for 36 per cent of electricity generation last year.
UK Coal has already begun consulting on plans to shut Kellingley, which employs 700 people, and Thoresby, which employs 600. Jobs are also likely to go at its head office in Doncaster. The company currently employs about 2,000 people.
It will leave employee-owned Hatfield colliery in South Yorkshire as Britain’s last remaining deep-pit mine - leaving a once-mighty industry on the edge of extinction.
The TUC said 340 jobs would be axed next month although this claim was neither confirmed or denied by the company.
It said the Government’s refusal to fund a long-term rescue plan would leave UK businesses and householders at the mercy of overseas energy suppliers.
TUC general secretary Frances O’Grady said: “Faced with the choice between closing two of the UK’s three remaining coal mines next year or of fighting for their future, the Government has gone for the short-term option and taken the easy way out.
“UK Coal is clearly in trouble. Miners and their families will be relieved to learn that ministers have avoided UK Coal’s impending insolvency by agreeing the terms of a repayable, fixed term, commercial loan.
“But that will come as small comfort to the 340 workers whose jobs disappear next month.”