A major food conglomerate, Associated British Foods (AB Foods), has issued a stark warning: its Vivergo bioethanol plant in Hull, the UK’s largest, faces closure. This threat comes in the wake of a new UK-US trade agreement that removes tariffs on American ethanol imports, fundamentally undermining the competitiveness of domestic producers and jeopardising hundreds of jobs.
UK Biofuel Industry Under Threat
AB Foods’ announcement follows a recent trade deal between the UK and the US, which eliminates a 19% tariff on US ethanol imports, replacing it with a tax-free quota of up to 1.4 billion litres. This volume is equivalent to the UK’s entire ethanol market, effectively allowing American fuel to flood the market duty-free. The move, while securing tariff cuts for UK exports like cars, has left domestic bioethanol producers vulnerable.
- Vivergo Plant: The UK’s largest bioethanol facility, owned by AB Foods, is consulting with 150 staff regarding an "orderly wind-down."
- Ensus Plant: The only other UK bioethanol producer, Ensus (owned by Germany’s Sudzucker Group) in Teesside, has also indicated potential closure due to the trade agreement.
- Job Losses: Vivergo warns that up to 4,000 jobs across the UK bioethanol industry, including farmers supplying wheat, could be affected.
Government Response and Industry Concerns
The government expressed disappointment at AB Foods’ announcement, stating that negotiations for financial support had begun on Wednesday. However, AB Foods had set a deadline for an agreement, which it claims lapsed. The company has stated that without short-term funding to cover losses and a long-term solution, the Vivergo plant will cease manufacturing before 13 September.
- Government Stance: The Department of Business is recruiting external consultants to appraise a potential plan for Vivergo and remains committed to working with the company to protect supply chains and jobs.
- Environmental Impact: Labour MP for Hull East, Karl Turner, highlighted that losing the UK’s bioethanol market would severely hinder the UK’s ability to achieve net-zero emissions.
- Future Dependence: The closure of both Vivergo and Ensus would render the UK entirely dependent on overseas suppliers for bioethanol, a fuel the government aims to constitute 10% of all aviation fuel by 2030.
US Subsidies and Trade Implications
The US has long provided subsidies and tax credits to its farmers and ethanol producers, making American ethanol highly competitive. The removal of UK import duties further amplifies this advantage. This agreement is seen as a significant win for US farmers in states like Iowa and Nebraska, key support bases for former President Donald Trump.
AB Foods had been lobbying the government for months regarding cheaper US ethanol shipments even before the tariff agreement. The company ceased wheat purchases for Vivergo on 11 June, indicating the severity of the situation.
