The future of the Guinness brewery at St James's Gate has been secured, with owner Diageo deciding to close its London plant and transfer all UK Guinness production to Dublin.

Diageo said output from the Dublin brewery would increase by 50 per cent and €14 million would be invested in the Irish economy as a result.

However, 90 jobs will be lost in west London when the Park Royal brewery closes in the summer of 2005. It produces four million kegs annually for the UK market, which will now be produced in Dublin.

The expanded Dublin brewery will be capable of producing one billion pints a year.

Mr Brian Duffy, managing director of Diageo Ireland, said nothing was ever guaranteed but the decision represented a major commitment to the Dublin site.

No new jobs will be created in Dublin but the decision is expected to end constant speculation about the brewery's future. About 1,200 people are employed at the Dublin site, but only 150 are directly involved in brewing.

The company said that large-scale investments in Dublin over the past 20 years were now paying off in terms of efficiency.

Mr Duffy said that, in recent years, the company was more used to answering questions about the potential closure of the Dublin brewery and it was a welcome change to be speaking about a major expansion.

Last April, the company said it was determined to cut overheads, but it declined to comment on reports that it was set to make up to one-third of its sales and marketing division redundant.

Mr Duffy said a review over recent months took a close look at the overall cost structure in Britain and Ireland. He added that it was easier to "ramp up" the Dublin operation for extra production than Park Royal.

Mr Gerry O'Hagan, supply director of Diageo's UK and Irish operations said: "St James's Gate already produces the equivalent of some eight million kegs of Guinness every year. With some additional investment in technology, St James's Gate could absorb the four million equivalent kegs currently produced at Park Royal."

Diageo said the decision was purely about the costs of production and not about competitive advantages in the Republic or favourable corporation tax rates. It owns 60 acres at St James's Gate and Mr Duffy said there was more room for expansion. Extra vessels and a new water purification plant will now be installed.

Asked about the sales of Guinness in Ireland, Mr Duffy said the brand was performing well in a declining market. He said on-trade volumes had fallen 8 per cent in the second half of 2003 and, despite media comment, alcohol consumption was actually falling in Ireland.

The company also indicated yesterday that it wished to continue its sponsorship of the All-Ireland Hurling Championship. Mr Duffy said the contract with the GAA ended this year, but the company was keen to agree a new deal. He said Guinness had been involved for 10 years and had put €25 million behind the event.

"We'd like to continue our sponsorship into the future. We believe it is a very healthy sponsorship," he said.