British Coal warns of more pit closures: Outlook remains grim as company discloses pounds 588m loss, in spite of record productivity levels. Mary Fagan reports

BRITISH COAL warned yesterday of more pit closures and job losses, as it disclosed a loss of nearly pounds 600m last year.

Despite record increases in productivity, and an operating profit that rose to pounds 545m from pounds 422m the year before, the company made a loss of pounds 588m after paying for restructuring, job losses and other costs related to pit closures.

Neil Clarke, British Coal's chairman, said: 'Further colliery closures are inevitable, I fear - but I am unable to say how many - unless we see a much larger market for coal.'

Mr Clarke said that the Government's recent White Paper on the coal industry has made the position for British Coal 'more complex' and failed to achieve the radical market changes needed by the company. He said the available extra market for coal could be as little as 8 million tons in total in the next two years - split between British Coal and independent mining companies. This is likely to save very few, if any, of the 11 pits previously earmarked for closure but now 'reprieved' while British Coal tries to win extra contracts with the electricity generators, National Power and PowerGen.

About 21,000 people have left the coal industry since October when British Coal sparked a public outcry by announcing the closure of 31 pits with the loss of 30,000 jobs. A further 3,000 management job cuts have been announced as the company strives to cut overhead costs. Coal production has ceased at 20 pits and the 11 on reprieve for 'market testing' are adding to British Coal's future problems by stockpiling up to 1 million tons a month. Excluding the 11 on reprieve, only 19 pits remain.

British Coal has already reduced its prices to the generators by 20 per cent in new contracts, compared with last year, and has offered still lower prices in an attempt to get the extra coal sales needed to save some mines. However, National Power and PowerGen have 33 million tonnes of stockpiled coal and want to run down stocks over the next two years. The Government has promised subsidies to help UK coal compete with world coal prices but until extra sales are secured the subsidy will not materialise.

Mr Clarke, whose pay and benefits increased last year by 4 per cent to over pounds 245,000, said: 'If the generators take a hard view they need not take any extra coal in the current financial year.' However, while Mr Clarke regards the short-term rundown of stocks as a major problem, a source in one of the generators said that the outlook for coal in the longer term is also 'very grim'.

Mr Clarke added that new gas-fired plants are coming on stream much more rapidly than expected. Nuclear Electric has also made unexpected progress and now accounts for about 22 per cent of the electricity generating market in England and Wales.

British Coal has meanwhile offered 19 pits where coal production has already stopped for lease and license to the private sector. But although there were 300 initial expressions of interest, only 18 parties have put up the pounds 10,000 bond to go to the next stage.

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