700 jobs face axe as Yorkshire pit closes in UK Coal survival bid

UK Coal is consulting on plans to shut Kellingley in Yorkshire, which employs 700 people, together with Thoresby in Nottinghamshire, which employs 600.

It will leave employee-owned Hatfield colliery in South Yorkshire as Britain’s last remaining deep pit mine.

Jobs are also likely to go at UK Coal’s head office in Doncaster, South Yorkshire.

It will mean the majority of the 2,000 people currently employed by UK Coal - which also operates six surface sites - facing a bleak future, just nine months after it was rescued from administration.

The firm is hoping to secure an emergency cash injection of up to £20 million through a combination of funding from the Government and the private sector but will still need to make the cut backs even if it succeeds.

A spokesman said: “We have started today consultations with the unions on looking at the way forward - that is, looking at reducing numbers in the coming months.”

“We are looking to secure the best outcome possible.”

The firm, which provides 4% of the UK’s electricity needs, has been hit by a strong pound and the increasing availability of cheap coal imports - especially from the US, where the shale gas boom has forced producers to find new international markets.

UK Coal’s operations are relatively small compared to other large global producers whose size enables them to operate with lower relative costs - cushioning profits when prices come down.

It means that while coal still accounts for 40% of Britain’s energy needs, indigenous producers struggle to compete.

UK Coal needs between £10 million and £20 million to carry on operating and is understood to be in advance talks over the funding, which it hopes to secure in the next few weeks.

Rival mining group Hargreaves Services has been named as a possible investor to rescue the business, together with cash from the Government.

But there is likely to be more pain even if the money is secured. The spokesman said: “We are looking to secure the best outcome possible.”

Labour’s Yvette Cooper and unions called on ministers to help try to rescue the sites.

Ms Cooper, shadow home secretary and MP for Normanton, Pontefract and Castleford, a neighbouring constituency to Kellingley, tweeted that the pit was “really important for local jobs & mixed energy supply”.

“That’s why Gov needs to work with UK Coal to keep pits open,” she added.

The TUC claims the Government will provide a £10 million loan towards the £20 million cost of closing the mines, with a loss of tax and National Insurance contributions to the Treasury of around £30 million a year.

It argues that closures will make the UK more dependent on Russian and other foreign-sourced coal, weakening the security of energy supply - and is putting forward an alternative rescue plan which it says will cost £50-£60 million

The TUC says it is challenging an argument by the Department for Energy and Climate Change (DECC) that under European rules it cannot provide state aid - and that it has obtained clarification on the issue from the European Commission.

Chris Kitchen, general secretary of the National Union of Mineworkers, said: “There is no economic case for the UK taxpayer to pay more to close pits than to keep them open.

“The Commission says there is no obstacle in providing modest help. All it would take to secure thousands of good jobs is a commitment from this Government.”

TUC general secretary Frances O’Grady said: “The Government should back help to keep Britain’s last coal mines open.

“This would be good for jobs, communities and for the environment as such assistance could help drive investment in carbon capture and storage, for which there is a growing international market.”

A DECC spokesman said: “The future of UK Coal is primarily a commercial matter. However, we are in close contact with the company to ensure that government is kept aware of the challenges they face.”

Ms Cooper said: “I think this is really troubling.

“We have fought many times to keep Kellingley Colliery open before and we’ve always succeeded. But we really need to stand together again at a time when we’ve got jobs at risk but also the whole of the remaining deep mine coal industry at a time when we need jobs but also we need to maintain that diverse energy supply.”

UK Coal, which provides 4% of the UK’s electricity needs, has been hit by a strong pound and the increasing availability of cheap coal imports - especially from the US, where the shale gas boom has forced producers to find new international markets.

Its operations are relatively small compared to other large global producers whose size enables them to operate with lower relative costs - cushioning profits when prices come down.

This means that while coal still accounts for 40% of Britain’s energy needs, indigenous producers struggle to compete.

UK Coal is seeking between £10 million and £20 million to carry on operating and is understood to be in advanced talks over the funding, which it hopes to secure in the next few weeks. But this will involve winding down deep pit operations.

Rival mining group Hargreaves Services has been named as a possible investor to provide cash, together with the Government.

UK Coal’s surface mines operate at: Butterwell, near Morpeth in Northumberland; Huntington Lane, near Telford in Shropshire; Park Wall North, near Crook, County Durham; Potland Burn, near Ashington, Northumberland; Lodge House, near Ilkeston, Derbyshire; and Minorca, near Measham, Leicestershire.

The firm went into administration in July following a fire that closed its Daw Mill pit in Warwickshire a year ago, resulting in 350 job losses.

But it was saved in a restructuring that saw it taken over with the backing of Britain’s pension rescue scheme, the Pension Protection Fund (PPF), in a deal that was hailed as helping to keep the lights on in the UK.