Scottish & Newcastle UK is to close its brewery in Dunston, Gateshead, by mid 2010 with the loss of 63 jobs, as part of owner Heineken's global cost savings programme.

The brewer said today (13 October) that it proposes to transfer the current brewing operations at Dunston to its John Smith's Brewery in Tadcaster.

Both breweries were previously owned by Scottish & Newcastle (S&N) UK, which was acquired by Heineken last year. 

Paul Hoffman, operations director at S&N UK, which will change its name to Heineken UK next month, said: "Clearly this is a sad day, but the proposal to close Dunston is not a decision we have taken lightly."

He added: "Falling beer sales have created general over capacity in the UK brewing sector and rising input costs have put unprecedented pressure on our business.

"The proposals we are announcing today are designed to address these challenges and to ensure that we remain competitive in the future. The Dunston site is currently running at around 60% capacity and our ability to consolidate beer production onto other sites presents a strong case for closure."

The move is part of Netherlands-based Heineken's three-year Total Cost Management programme, launched this year.

The Dunston brewery was acquired by S&N in 2004, with the purchase of the assets of the Northern Clubs Federation Brewery. All beer production - including Newcastle Brown Ale - transferred to Dunston from the Tyne brewery in Newcastle in 2005.

At that time, it was hoped that the amalgamation of the two sites would provide a sustainable, long-term future for Dunston. However, the company said a "significant downturn" in the economy and the UK beer market has resulted in a surplus in brewing capacity in the industry.

S&N said it has carried out a detailed review of all its brewing sites and concluded that, for Dunston, closure is the most viable option going forward.

It is also proposing changes on other production sites, including Hereford, Tadcaster and Royal Brewery in Manchester, which the company said will help it to remain competitive within the UK market.

Scottish & Newcastle (S&N) announced last month that it will formally change its name to Heineken UK Limited from 23 November.