GLOBAL DRINKS giant Diageo has told staff at its Irish brewing operations that the group’s planned €650 million investment in new facilities will remain on hold until the economy here recovers.

This means that breweries in Kilkenny and Dundalk, which were slated to close, will remain open for the foreseeable future.

But Diageo has told staff that it requires a reduction of 68 jobs at its St James’s Gate brewery in Dublin to “address competitiveness” issues.

It is also thought to be seeking changes to work practices and an extension of shift patterns from eight hours up to 12 a day.

The decision to place the investment programme on hold for an indefinite period follows an extensive 12-month review.

Diageo announced its investment programme in May 2008. But it was put on ice in January last year as beer sales slumped in the recession and a large number of pubs closed for business. Alcohol sales in Ireland fell again last year and there is no sign of a pick-up in consumer demand.

The investment programme was to have involved the construction of a super-brewery on a 73-acre site in Leixlip, Co Kildare, on land part-owned by the Guinness family. The Leixlip brewery was to have opened in 2013.

Diageo also intended to upgrade its iconic brewery at St James’s Gate, although its capacity would have been reduced.

Diageo had drafted plans to sell surplus land at its Dundalk, Kilkenny and St James’s Gate breweries, which, at the time, were estimated to be worth €500 million.

But the slump in the Irish property market put paid to that element of the programme.

In a note to staff on Thursday, Diageo said the investment programme “remains on hold and will be revisited when the economic context is more certain”.

Diageo continues to retain an option to acquire the Leixlip site.

Diageo is proposing to reorganise its brewing and blending beverage agents operations at St James’s Gate. This will involve an investment of about €5 million to consolidate all kegging operations at St James’s Gate from the regional breweries.

Diageo has cut its 2,300-strong workforce in Ireland by 9 per cent over the past year.

Commenting on Diageo’s announcement, Seán Mackell, general secretary of the Guinness Staff Union, said: “We are currently in the process of engaging with the company on these proposals. This is still at a very early stage.”

The union is likely to push for a commitment to provide funds to upgrade the St James’s Gate brewery as part of any changes.