Jim Ratcliffe’s chemicals company Ineos has been granted £120m of government funding to help save the UK’s last ethylene plant at Grangemouth, in a deal expected to protect more than 500 jobs.

The investment in the Scottish plant was necessary to preserve a vital part of the country’s chemicals infrastructure, the UK government said. The ethylene produced there was essential for medical-grade plastics production, water treatment and in aerospace and car-building, it added.

Keir Starmer said the investment, with an additional £30m from Ineos, was proof his government would “invest in Britain’s future”.

“This is about good jobs, stronger communities, and a modern economy that works for everyone,” he said in a statement.

“Our commitment is clear: to back British industry, to stand by hardworking families, and to ensure places like Grangemouth can thrive for years to come. Promise made, promise delivered.”

Ratcliffe, 73, has a minority stake in Manchester United and is worth $14.7bn (£11bn) according to Bloomberg’s billionaires index.

He said the government support “protects 500 high-value jobs, secures supply chains and preserves the industrial capability the nation needs”.

The deal, which will be unveiled at the site near Edinburgh by the chancellor Rachel Reeves and business secretary Peter Kyle on Wednesday morning, also has significant political implications.

Both the UK and Scottish governments have come under intense criticism for failing to act quickly to replace the hundreds of jobs lost earlier this year when Ineos closed its other major site at Grangemouth – an oil refinery that it co-owned with PetroChina.

The political crisis over job losses linked to the transition away from oil and gas deepened when ExxonMobil announced last month it was closing its ageing ethylene plant in Fife next February, with the loss of 429 jobs. In that case, the UK government rejected pleas to invest in it, arguing the site has no competitive future.

With less than six months to go before elections for the Scottish parliament in May, the latest opinion polls show Labour is trailing far behind the Scottish National party and is neck and neck with Reform UK, with voters deserting Labour in protest at the UK government’s handling of the economy.

The Department for Business and Trade said about 40% of Europe’s ethylene production capacity had either shut down or was at risk.

Reeves seconded the prime minister’s stance. “We said we would stand squarely behind communities like Grangemouth and we meant it,” she said.

“Building on the millions of pounds we’ve already invested in Grangemouth, this vital package protects our national resilience and secures the livelihoods of hundreds of people employed at the site way into the future.”

The funding follows two other jobs announcements at Grangemouth unveiled jointly by the Scottish and UK governments last week, with nearly £10m being released to fund new low-carbon green chemicals factories that are expected to create up to 310 new jobs by 2030.

A university startup called MiAlgae expects to start making omega-3 for pet food and fish farm meal from whisky byproducts at a new plant there next spring, while a new bio-refinery owned by Celtic Renewables will make the chemicals acetone, butanol and ethanol from whisky and agricultural waste.

Meanwhile, Ineos is poised to make hundreds of job cuts across the company’s global workforce as Ratcliffe’s heavily indebted empire comes under increasing pressure from the high cost of gas, which it uses as a feedstock at its refineries.

It plans to cut 60 jobs at its chemicals site in Hull, which makes petrochemical products such as acetic acid, and will also cut hundreds more from the carmaker Ineos Automotive.

It set out plans to cut a fifth of jobs at its East Yorkshire chemicals plant after closing two chemical factories in Germany earlier this year, blaming “sky-high” energy costs and “dirt cheap” imports from China.

The company has accused Europe of carrying out “industrial suicide” by imposing green policies that Ineos claims has raised the cost of energy further.

The group is also scrambling to file anti-dumping cases to block the import of cheap chemicals products into the EU in an attempt to protect its core petrochemicals business from further financial strain.