Business reporter Martin Shankleman: The industry sector has started 1999 the same way it ended 1998

The cuts would fall most heavily in the north of England, where 350 jobs are to go at ICI's Runcorn plant and 150 jobs are being cut at ICI's Crosfield subsidiary at Warrington.

The plants product chlorine and caustic soda for industrial applications.

Jobs are also to be cut in ICI's American decorative paints divison.

The company has been hit by a downturn in the bulk chemicals business, and said that profits for 1998 would be around £315m - substantially less than analysts expected. It is to take a £120m restructuring charge to pay for the cutbacks.

The news caused ICI shares to plummet, losing nearly 8% in the first few minutes of trading on the London Stock Exchange, although they later recovered some of that loss.

Deal is off

ICI's problems stem from the failure of its plans to sell off part of its chemicals business to US rivals in order to finance the acquisition of more profitable speciality chemicals, acquiring some £4.4bn in debt in the process.

On Monday one of the crucial components of that sale collapsed, as a $727m (£445m) deal to sell off its titanium dioxide business was called off.

The deal is at the heart of ICI's plans to sell of its bulk chemicals business to US rival DuPont.

DuPont was keen to acquire a foothold in European markets, and was planning to pay $3bn for polyester plants and ICI's non-US titanium dioxide interests.

But US trade regulators were worried that the sale would give DuPont a dominant position in titanium dioxide, and ordered it to sell some of its plants to another company, making the deal less attractive.

"It's quite a major blow," said Jeremy Chantry, chemicals analyst at Credit Lyonnais Securities.

"I suspect a lot of numbers for 1999 were predicated on an interest line based on a sharp fall in the level of debt." Tioxide to float off?

ICI's chief financial officer Allan Spall said that the company would now consider floating off its tioxide business as a separate company. Titanium dioxide is a crucial component in the manufacture of paints, but ICI says the business did not fit into its longer term portfolio.

ICI had already encountered regulatory problems when another US chemical company, W.R. Grace, pulled out of a $455m deal to acquire its Crosfield chemicals business in October.

The regulatory problems, which have lasted 18 months, mean that ICI is now likely to realise even less from any future sale, as conditions in the chemicals industry have worsened considerably since it first planned the disposals.