The owner of Britain’s biggest bioethanol plant is threatening to close the Hull site by mid-September, putting 160 jobs at risk, after it warned that concessions made in the recent US trade deal would wipe out the industry in the UK.
Associated British Foods (ABF) said that it had entered formal negotiations with the government over the future of the Vivergo plant but that it had begun consultations with staff “to effect an orderly wind-down”, given the outcome of talks with ministers was “uncertain”.
The food producer, which also owns the Primark clothing chain and Kingsmill bread, has blamed the UK’s trade deal with Donald Trump – which would allow tariff-free US ethanol into the country – for worsening an already difficult situation.
Bioethanol, which is a renewable fuel and a petrol substitute, is produced from agricultural products. Vivergo produces bioethanol using locally sourced wheat but ABF said it had stopped wheat purchases on 11 June.
Under the terms of the bilateral trade deal struck by Keir Starmer in May, which comes into force on Monday, the current 19% tariffs on US ethanol will fall to zero through a 1.4bn-litre quota, which represents the size of the UK’s entire current ethanol market.
Downing Street denied that Vivergo’s threatened closure was connected to the accord, saying the industry “has been facing significant challenges for some time, long before our deal with the US”.
Vivergo and Ensus – which is owned by Germany’s Südzucker Group and operates a bioethanol plant on Teesside – are behind nearly all the UK’s bioethanol production capacity. The factories and people working in their supply chains support thousands of jobs.
ABF and Ensus have been warning since early May that the British bioethanol industry could collapse as a result of the deal, under which the US has agreed to lower the tariff on 100,000 British cars to 10%.
Negotiations are still continuing on a promise to cut the 25% tariff rate on British steel imports to the US to zero, amid concerns about whether the origin of some materials used in UK steelworks means they are not covered by the exemption.
An ABF spokesperson said on Thursday: “Over the coming weeks, we will engage intensively and transparently with officials to try to find a viable path forward.
“In parallel, we will today begin consultation with our employees. This process will conclude with a major decision to be made on the plant’s future, which will depend on whether the negotiations deliver a credible route forwards.”
On Wednesday ABF had extended its deadline for deciding the fate of the Hull plant by 24 hours, in the hope that the government would come up with the support package it had been requesting.
However, it told investors on Thursday that unless the government could “provide both short-term funding of Vivergo’s losses and a longer-term solution”, it would close the Hull plant by 13 September, once it has ended consultations with staff, and after fulfilling all of its contractual obligations.
A spokesperson for Keir Starmer said officials and ministers had met ABF and Ensus “consistently over the last few months to understand and seek options to address some of the challenges facing the bioethanol sector”, stressing that these challenges pre-dated the US deal.
The spokesperson described ABF’s announcement as “disappointing”, given that it followed the government’s entering into negotiations with the company on financial support.
He said ministers would “continue to take proactive steps to address the longstanding challenges the company faces” and remained “committed to working closely with them throughout this period to present a plan for a way forward that protects supply chains, jobs and livelihoods”.
