The UK government is to invest £120m in a support package for the Grangemouth industrial complex.

Owners Ineos will contribute £30m to the joint investment deal.

The site, the UK’s last ethylene plant, employs about 500 people in the production of plastics.

The government says this deal means the Grangemouth plant “has been saved”.

Prime Minister Sir Keir Starmer said the move was proof his government would protect jobs and ensure places like Grangemouth can develop into the future.

He said: “We’re delivering new opportunities, fresh investment and security for the next generation of workers in Scotland.

“Our commitment is clear; to back British industry, to stand by hardworking families, and to ensure places like Grangemouth can thrive for years to come.”

The complex uses shale gas brought in by ship from the United States to produce ethylene, a key ingredient in plastics used in advanced manufacturing and the automotive and aerospace industries.

It stands next to the Grangemouth oil refinery.

In April, it stopped processing crude oil and moved to being an import terminal for finished fuels, with the loss of 400 jobs.

In January, the Ineos chairman Sir Jim Ratcliffe warned the chemical industry was coming to an end in Britain due to high energy costs and carbon taxes.

He said the new investment package demonstrated Ineos and the UK government’s commitment to British manufacturing.

“It protects 500 high-value jobs, secures supply chains, and preserves the industrial capacity the nation needs,” he said.

“The support of the UK government is welcome as we work to deliver competitive and efficient low-carbon manufacturing for the UK, long term.”

In recent months there has been concern about the future of the UK petrochemical industry because of the rising cost of energy.

Last month, ExxonMobil announced plans to close part of the Mossmoran chemical plant in Fife by February, with the loss of up to 400 jobs.

The company said the high cost of energy at the plant, which also produces ethylene for the plastics industry, was partly to blame for the decision.

The UK government has warned high energy costs have caused problems for the chemicals industry across Europe.

It said about 40% of ethylene gas capacity has either closed recently or is at risk of closure.

The UK and Scottish governments have been scrambling to reduce the impact of recent job losses in the sector.

They made a joint commitment to supporting a green energy hub at Grangemouth, on part of the site left vacant by the refinery closure.

In her budget last month, chancellor Rachel Reeves announced £14.5m for Grangemouth to support a transition to low carbon and renewable industry on the site.

But the UK government has been accused of failing to deliver £200m pledged to Grangemouth from the National Wealth Fund.

Unions representing workers at Grangemouth have accused both governments of doing too little, too late.

With an election for the Scottish Parliament due to be held in May, senior Labour ministers will have been keen to ensure the future of this key industrial site was not in doubt.

Ineos has agreed assurances that funding will only be used to improve the site and allowed the government a share in future profits.

The firm said it had spent more than £100m maintaining operations at the site over the past year.

And there is also involvement – as yet unclear – from Natwest, which says one of its priorities is accelerating regional growth.