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 said it would close one of the UK’s two bioethanol plants if it did not receive state support, but it was positive that the government had started negotiations over the plant’s future.
A spokesman for ABF said: “We are extremely pleased to be entering the next phase of formal negotiations with government over the future of Vivergo.
“We believe it is a very positive signal that government recognises the strategic importance of a domestic bioethanol industry, and is serious about working with the sector to find a sustainable long-term future. We look forward to engaging intensively and constructively with ministers over the coming weeks.”
Although the plant employs about 150 people, about 4,000 jobs could be lost in associated farming industries in the Humber region.
If negotiations fail it is thought the plant will stop manufacturing before 13 September.
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”.
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.
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 Department for Business and Trade 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 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.”
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.
The AB Food spokesman added: “ABF cannot continue to absorb losses at the plant. That is why a timely solution is vital. Our clear preference is to find that solution through this process and to get back to running a business that can thrive in the long term.
We want to keep Vivergo operating. We have invested hundreds of millions of pounds in it. We have fought hard to save it – and the potential ahead is enormous” – AB Foods spokesman
“In parallel, we have entered into a consultation process with our employees – a necessary step given there can be no guarantee that the negotiations with government will be successful. Our employees are our most important consideration, and we will engage with them properly and transparently about the future. Consultation is not a fixed outcome – and closure is not a certainty. The outcome depends on the progress we are able to make through negotiations with the government. Our goal is for that outcome to be positive.
“We want to keep Vivergo operating. We have invested hundreds of millions of pounds in it. We have fought hard to save it – and the potential ahead is enormous. Just days ago, we signed a £1.25 billion memorandum of understanding with Meld Energy to anchor a world-class Sustainable Aviation Fuel facility at the site. There is a real opportunity for Hull to be home to one of the UK’s most exciting clean fuel clusters.
“ABF has always been and remains a long-term UK investor with a consistent record of supporting UK industry and jobs. We are committed to playing a lasting role in the country’s green industrial future.”
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