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This decision effectively splits the town of Grangemouth in two: Just over half the people who work on the site are going to lose their jobs, and just under half will get to keep them.
The reason is very simple: The refinery, which employs 570 people, is likely to survive. The petrochemical works, which employs 800 people, is going to the wall. Managers say it is very unlikely that a buyer is going to be found.
This plant is very important for the Scottish economy, but for the life of Grangemouth it is absolutely critical. Directly or indirectly, it provides every single job here.
I spoke to one young man about his options. He said he had two: Go on the dole or move to Saudi Arabia, and that is the choice facing many people in this town.
Scotland's First Minister Alex Salmond has said he is "not accepting that we are going to have a closure" at the Grangemouth facility.
"I am not prepared to give up on Grangemouth and I don't think anyone else should be either," he told BBC News.
Mr Salmond said that Ineos' management and the union were "inches away" from an agreement, which ultimately failed because of "nuances in the wording".
He called for a final effort to bring the two sides together.
The MP for Falkirk, the constituency where the Grangemouth plant is located, has strongly criticised the Unite union for failing to agree a plan to save jobs.
Writing on his personal blog, Eric Joyce said the union called a strike "over a pathetic and petty issue related to Labour Party internal politics".
He also sounded a note of skepticism about the chances of finding another buyer for the plant: "What’s the proposition as it stands? Come and enjoy a non-relationship with a militant union acting with its workers’ interests at the bottom of its priorities?"
Unite had been accused of unduly influencing the selection process to find a replacement Labour candidate for Falkirk after Mr Joyce left the party - but an internal inquiry cleared union members of any wrongdoing.
The Chief Secretary to the Treasury Danny Alexander has said that the impact of the closure of part of the Grangemouth plant is "very significant" but that he hopes the decision is not final.
He told ITV News' Economics Editor Richard Edgar that he wants "both sides to get back round the table and try to find a better solution".
The Prime Minister's official spokesman has said that "fuel supplies are continuing to be delivered" despite today's decision to close part of the Grangemouth plant.
"Of course, Government has contingency plans for a range of scenarios, as you would expect," he added.
He described the decision as "disappointing" and urged both workers and Ineos to "find a way to continue their dialogue".
Some workers looked emotional as they left a meeting at Grangemouth in which their employer Ineos announced plans to close the petrochemical side of the plant.
A Number 10 spokesman has told reporters the Government will not be providing a financial bail out or nationalise Grangemouth oil refinery after its owners announced it would close the petrochemical plant:
The petrochemical part of the Grangemouth plant employs around 800 workers out of a total workforce of 1,370.
Energy Secretary Ed Davey has said he is "saddened" to hear that the petrochemical plant at Grangemouth will close.
He urged Ineos to continue "dialogue with the workforce" to keep the oil refinery part open:
The President of the AA has warned that petrol prices could rise as a result of closures at Grangemouth and other refineries in Europe:
Latest ITV News reports
Grangemouth owners Ineos are in last ditch talks with the workers' union, but the workforce is just one of the problems facing the plant.
Thousands of jobs are under threat after a dispute over conditions led to a shock decision to close the petrochemical site in Grangemouth.