Guinness manufacturer Diageo has announced it is to close its brewing facilities in Dundalk and Kilkenny with the loss of up to 250 jobs.

Diageo is to retain part of its Guinness Brewery at St James's Gate in Dublin, though production capacity will be reduced by one-third and half of the existing site will be sold off. 

The company says it will invest €650m in the remainder of the historic site, with a new brew house to be built on the north side of Thomas Street, to open in 2013.

Under the plan, Guinness will also build a new brewery on the outskirts of Dublin at a location yet to be announced.

The sale of property and lands in Dublin, Dundalk and Kilkenny will net the group around €500m.

Diageo Chief Executive Paul Walsh says letting staff go is the hardest element of the announcement, but the changes are necessary.

Today Diageo gave a guarantee that every pint of Guinness sold in Ireland will be brewed in Dublin, and the billion pints produced in Ireland every year will be destined primarily for the British and Irish markets.

Tánaiste and Minister for Enterprise, Trade and Employment Mary Coughlan said she welcomed the announcement.

'This is a major investment that secures the future of brewing in Ireland,' she said.

'I also welcome the company's intention to retain and upgrade the St James's Gate brewery which is of great historic significance to Dublin.'

IBEC also warmly welcomed the €650m capital investment plan announced by Diageo, saying it is 'the biggest single investment in the history of the Irish food and drink sector and a massive vote of confidence in Ireland as a location for business and in Irish workers'.

Kilkenny brewery

Diageo says 93 people are directly employed in its brewing operation in Kilkenny.

It is understood that there are another 50 people employed in the Kilkenny brewery on short-term or temporary contracts.

Brewing has been taking place in Kilkenny for almost 300 years.

Mayor of Kilkenny City Marie Fitzpatrick said the news has come as a major shock.

Ms Fitzpatrick said the area where the brewery is located is a vibrant part of the city.

She said staff at the plant had suspected some element of downsizing, but not a full closure.

Dundalk brewery

Diageo employs 85 people at its Dundalk plant.

Jim D'Arcy, Chairman of the Dundalk Town Council, expressed disappointment at Diageo's decision to end the long tradition of brewing in Dundalk.

Cllr D'Arcy said the first priority must now be to ensure that the most attractive possible redundancy package is secured for the 85 people who will lose their jobs as part of the rationalisation programme, and that retraining is made available to those wishing to pursue other employment opportunities.

The Executive Director of the Dundalk Chamber of Commerce has also said the news is disappointing.

Bill Tosh said the announcement came totally 'out of the blue' for the people of Dundalk.

He said the plant's closure would have a wide effect, as the company used local firms for some contracts like maintenance and distribution.

Cllr Jimmy Mulroy, Chairman of Louth County Council, said Diageo's decision highlights the need to diversify the range of employment opportunities available in the town and in Co Louth more widely.

Diageo workers' future

Staff at Diageo were told this morning that employees affected by the change will be offered relocation packages where possible, but severance packages, career counselling and outplacement support will also be made available.

Guinness Workers Union General Secretary Sean Mackell said this morning's announcement is very bad news for workers.

He warned the GWU would be totally opposed to compulsory redundancies.

He said the final arrangements of the plan would only be determined following discussion and negotiation with staff.

Mr Mackell said the company was trying to give the impression that the announcement was good news for Ireland, when in fact the opposite was the situation. He said Diageo has made a profit every year in Ireland since 1759.