An industrial crisis that almost tipped Scottish economy into the abyss

The three other men had been waiting in London: Jim Ratcliffe, marathon man, no-nonsense Yorkshireman, Swiss exile and Ineos overlord; and his two most senior lieutenants and fellow shareholders, John Reece and Andy Currie. By the time they rang off, they had reached the decision that had seemed inevitable all day.

Len McCluskey - leader of the Unite union at war with Ineos - might have been loudly protesting that his organisation's new offer to accept all the management's demands was no humiliation, but these men knew otherwise. It was a humiliation. Having achieved everything they had been demanding of the union, they agreed that the plant could reopen for business. There was certainly nothing Red about this October.

Flash back to the strike of April 2008, when it had been McCluskey's men who were celebrating. Cars had formed queues for fuel, forecourts had run dry and Gordon Brown and Alex Salmond had held emergency talks in the Commons.

Ratcliffe and his people were forced to do what almost no other major UK management team had done in 30 years. They capitulated, abandoning all of their plans to reduce employee conditions.

Since that momentous victory, the union headquarters at the plant had taken on almost mythic significance for its members. With its hammers and sickles, Cuban flags, protester memorabilia - not to mention control over the Forties pipeline - this was a socialist stronghold on the Forth.

The two sides will argue about the decisive moment that made 2013 so different, but everything was set for collision from the moment the management suspended union rep Stevie Deans over alleged misconduct in the summer.

The charge was that he had been using work time and resources to recruit Ineos workers in his campaign as chairman of the Falkirk West Labour constituency party to instate a left-wing candidate to replace disgraced MP Eric Joyce.

Some say it was perfectly reasonable for the management to take the line it did. The matter had been all over the press, after the Sunday Herald broke the story, and turning a blind eye would have enabled future rule-breakers to argue that regulations were not always applied consistently.

"These things have a habit of coming back and biting you," says one former chemical plant manager who asked not want named.

But if anyone was looking to start a row, it was a pretty good way to do it. Given that the two sides were already in negotiations over reducing staff conditions, it was unfortunate timing to say the least.

Len McCluskey certainly thought so, immediately phoning the company to threaten that the 1370 staff would be downing tools unless Deans was reinstated. The management lifted the suspension but continued the investigation, prompting the union to ballot for industrial action. Whether or not this was always the management's desire, even sources on the left say this ballot might have been Unite's cardinal mistake.

Armed with an 81% mandate, the union kicked off a work-to-rule on October 7, shortly afterwards announcing a 48-hour strike for Saturday 20 and Sunday 21. The management began the slow process of shutting down the plant on October 14. Grinding Grangemouth to a halt had to start early for health and safety reasons.

Ineos warned staff and the media that the plant was losing £150m a year and that it would close by 2017 at the very latest unless three things happened: employees accepted reduced terms, the UK Government underwrote £125m of a £300m investment into a new deep sea terminal for importing US shale gas, and the Scottish Government chipped in £9m.

The negotiations over employee terms and conditions were failing to progress, however. This was despite the fact that union officials were privately acknowledging that the state of the industry meant they would have to give ground, including abandoning one of the last private final salary pension schemes in the country.

The Stevie Deans matter ended up in front of the industrial dispute resolution body Acas but still couldn't be settled. Talks collapsed after 16 hours when the two sides failed to agree on how long strike action would be suspended and the union refused to publicly apologise to Jim Ratcliffe over allegedly defamatory statements.

Yet suddenly the union changed tack. It called off the strike, having realised management had not only begun the plant shutdown to accommodate their right to strike, but to shut the plant for good. There had been suspicions about this for weeks, since Ineos had rejected a union proposal that the plant could keep running with a skeleton staff in the event of a strike to avoid a costly shutdown. Sure enough, the company shortly announced that the whole plant was now closed. In effect it was the company that had gone on strike itself.

Ignoring calls from the Scottish Government to get back around the negotiating table, Ineos made clear that it would stay closed over the weekend while the staff considered what amounted to an ultimatum.

With Ineos bypassing the union altogether, they were offered a reduced package that included a three-year pay freeze and reduced pension scheme sweetened by a one-off payment of up to £15,000. If sufficient numbers hadn't signed up by a 6am Monday deadline, the part of the plant that makes petrochemicals would close permanently with the loss of about 800 jobs. The oil refinery would reopen, said Ineos, but its future would be less assured if it stood alone.

The workforce decided to call their bluff. Loudly encouraged by Unite, with the likes of Finance Secretary John Swinney in the background calling it "inappropriate" for the company to claim it was "financially distressed", 65% of members sent forms to conveners rejecting the offer.

You could almost hear the national sharp intake of breath. Those familiar with the company's ways knew that it didn't make threats idly. It nearly went bust in 2008 after borrowing too much to expand in the run-up to the crash. When the UK Government refused to defer a £350m VAT bill to help the company out of a hole, it promptly switched headquarters to Switzerland in 2010. Sources say Jim Ratcliffe has not been overly keen to do business in the UK since.

As the hours ticked by on Tuesday, the Scottish Government stressed it was on the hunt for other buyers in case of the worst. Alex Salmond was telling people privately that he had various moves in reserve that he was confident would restore the status quo.

Ratcliffe and his top team met in London that day. They already had strong indications the Scottish Government would give them the £9m they wanted. They had also been told earlier in the week that the UK Government had granted preliminary approval for underwriting the terminal investment - contrary to speculation that the authorities were minded to refuse.

This was the part that perhaps was the most vital. The company's debt situation was such that the banks were literally not prepared to lend it the money for investment, confirms Gerry Hepburn, the chief financial officer of the plant.

In contrast, the proposed changes to employee terms were only going to save about £20m a year, about half of which was on the petrochemicals side. If the plant really was making a loss, as bosses claimed, then it might have had no choice. However, both parts of the plant are actually profitable.

The loss claims refer to the fact that the company is losing cash because it is spending more on investments than it is making in profits.

But normally accounting doesn't count this way because investments are seen as a means of making profits in future. Ratcliffe and his people were about to cause chaos to the Scottish economy for the sake of a few million pounds a year.

Calum MacLean announced the decision to close the petrochemical plant to the 800 staff at a meeting at 10am on Wednesday. Calling it a "hugely sad day" for everyone at Grangemouth, the staff were informed that the liquidators would be appointed the following week.

Those who were not too emotional talked of their shock at the decision. Unite Scottish convener Pat Rafferty accused the management of economic vandalism. Eric Joyce put the boot into the union, blaming it for, "the stupidest of strikes for the most idiotic of reasons".

UK energy secretary Ed Davey asked his colleagues at the Department for Business to find a new buyer, and had a long conversation with Ratcliffe on Wednesday night. Salmond called an emergency meeting of the Scottish cabinet, which agreed to make one further attempt to get the sides to reach a compromise, before launching a telephone blitz of his own.

On Thursday morning, Len McCluskey arrived at Grangemouth to lead a meeting with the management.

Having made the original threat of strike action in the summer, to his credit he wasn't hiding now that the opposite message needed to be delivered.

In the interests of saving the plant, he told the media, Unite was accepting the management terms "warts and all".

Meanwhile Salmond met a senior BP executive for a drink that evening, having heard that he was coincidentally in town. This produced a deal to reduce the cost of gas to Ineos by about £40m a year, according to government sources. This might well have clinched the decision to save the plant, although others say that is quite unlikely given the attraction of keeping the plant open if the UK Government were prepared to underwrite the investment.

At any rate, Team Ineos waited until 11am on Friday to confirm the whole plant would be saved and the £300m investment would go ahead. In case anyone had been in any doubt, the empire had just struck back.

Opinion is divided over the management's strategy through all this. Sympathisers say it was simply reacting to difficult financial circumstances.

Others hold that it either deliberately provoked the shutdown, or was somewhat indifferent about the plant's future in view of past clashes with the union and the UK Government.

Stephen Boyd, assistant secretary of the STUC, is among those who are confused by the management's actions. "Once they said they were shutting it down, there was no way that the union wasn't going to accept their terms. They just couldn't take the risk that the company wasn't going to switch it back on," he says.

He adds: "I look at it and wonder, is it possible they would have closed the plant to spite their faces, even when they stood to make a lot of money if they went ahead?"

An industry specialist with close links to the plant takes a different view: "Guys like Calum MacLean care passionately about the UK chemicals industry. This is what they grew up in, even if they are hard-headed businessmen. They did what they did because they had no choice."

Only those at the top of the company really know for sure, of course.

When the smoke from the huge furnaces on the industrial Forth resumes and the strange chemical tang fills the air once more, all staff will know is that fewer of the proceeds will end up in their pockets than before.