A CHEMICAL company responsible for a major fire which forced the evacuation of people from hundreds of homes was last night facing a huge fine for failing to ensure the safety of its workers and neighbours.

Distillex, which ran the site in North Shields, yesterday apologised and admitted two charges under the Health and Safety Act 1974. But magistrates said their powers to deal with the crime with a maximum fine of £40,000 were insufficient, because of the severity of the incident.

North Tyneside magistrates were told that the fire, which cost the chemical recyling plant more than £1m in damages, was caused by sparks from a small hand-held angle grinder.

Smoke from the blaze was seen up to 20 miles away as about 300 firefighters attended the scene. Drums were catapulted 150 yards away by huge explosions. A five-mile exclusion zone was also enforced over Newcastle International Airport.

Paul Stanworth, prosecuting, said an investigation into the fire had found a series of flaws in the way the site was managed.

The company had failed to provide adequate training for its staff, chemicals were not kept in a safe storage area and managers were not always aware of what workers were doing.

The incident last April was caused by an angle grinder being used to cut protective metal casing from a plastic container holding a flammable solid soaked in hectane.

Mr Stanworth said the firm should have used a cold method, such as bolt cutters or a hand-saw.

The company's managing director, Adrian Jones, admitted two charges of failing to ensure the safety of workers and of failing to ensure the safety of neighbouring residents and businesses.

Simon Catterall, defending, said: "The site had contracts, clients, customers and work and the company has lost it all.

"It is the company's first prosecution in more than 20 years and we thank God that nobody was injured."

Bench chairman John Fleet said: "We are firmly of the opinion that our sentencing powers are inadequate to mark the gravity of this offence."

He committed the case to Newcastle Crown Court for sentencing on a date yet to be fixed.

At the time of the fire, the site held about 400,000 litres of chemicals, mainly those used in such substances as paint thinners.