Thousands of jobs in the UK are at stake over the potential loss of a bioethanol business in Hull because of the tariff trade deal struck between the US and the UK.
Associated British Foods has threatened to close one of the UK’s two bioethanol plants if it does not receive state support and says that although the government is negotiating with it over support, it will begin consultations with staff at its Vivergo bioethanol business “to effect an orderly wind-down”.
Although the plant employs about 150 people, up to 4,000 jobs could be lost in associated farming industries in the Humber region.
The plant will stop manufacturing before 13 September AB Foods said.
As part of an agreement to cut US tariffs, the UK government has agreed a tax-free quota of up to 1.4 billion litres of the chemical compound derived from wheat, corn and sugar beet, which is used in a variety of substances including antiseptics, food, alcoholic drinks and fuel.
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Another producer, Ensus, which operates the UK’s only other ethanol site, has already announced that it may have to shut its plant because its business position had been “fundamentally undermined”.
The government said it was “disappointed” to see the announcement after it entered talks with AB Foods on Wednesday about financial support.
Under the tariff deal, the US can export 1.4 billion litres of the fuel – equal to the UK’s entire ethanol market – duty free, which means businesses in the UK do not have to pay tax if they buy the US fuel.
In return, the government secured tariff cuts on UK exports to the US, including on British cars.
AB Foods has been warning ministers for many months – before the trade deal – about cheaper US shipments coming into the UK. In states such as Nebraska and Iowa, where US president Donald Trump has a lot of support, farmers and others who produce the fuel receive subsidies and tax credits.
The Department for Business and Trade (DBT) said that it had only been able to enter into negotiations with AB Foods on the day of the company’s deadline for talks – 25 June.
On Wednesday, Karl Turner, the Labour MP for Hull East, said: “To lose our bioethanol market would seriously hamper the UK’s ability to reach net zero and devastate communities like Hull in the process.”
The DBT is recruiting external consultants to appraise and provide due diligence on a plan for Vivergo. A spokesperson said: “We will continue to take proactive steps to address the long-standing challenges the company faces … and work to present a plan for a way forward that protects supply chains, jobs and livelihoods.”
If the Vivergo plant in Hull and Ensus’s site in Teesside shut down, it would leave the UK dependent on overseas suppliers despite the target of 10% of all fuel used in aircraft to come from sustainable sources, one of which is bioethanol.
We’re willing potentially to put government money into a restructure to make sure they’ve got a strong future” – Jonathan Reynolds, business secretary
Vivergo has warned that 4,000 jobs in the UK bioethanol industry could be affected, including farmers who grow the wheat that produces the fuel.
Business secretary Jonathan Reynolds described Vivergo’s announcement that will close as “premature”.
He said: “We’re willing to engage with them and potentially put government money into a restructure to make sure they’ve got a strong future.
“So, frankly, I really do regret those decisions to start consultations as to, you know, let the workforce go and close the plant. I think that’s premature, because we were in good faith in those negotiations with them.”
Vivergo said the Hull plant can produce up to 420 million litres of bioethanol from wheat sourced from thousands of UK farms.
It described bioethanol production as “a key national strategic asset” which helps reduce emissions from petrol and is expected to be a key component in sustainable aircraft fuel in the future.
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