Associated British Foods (AB Foods) has warned it may shut down one of the UK’s two bioethanol plants unless it receives government support, following a new trade agreement between the UK and the US.
According to the BBC, the company announced it has begun consulting with 150 employees at its Vivergo bioethanol facility in Hull, initiating plans for an "orderly wind-down" of operations. This move comes despite the government’s commitment to enter “formal negotiations” with the company regarding potential financial assistance.
At the heart of the issue is a recent UK-US trade deal that eliminates a 19% tariff on American ethanol imports and replaces it with a tariff-free quota of up to 1.4 billion litres—an amount equivalent to the UK’s entire ethanol market. This effectively allows US ethanol to enter the UK without any duty, making it significantly cheaper than domestically produced fuel.
In exchange, the UK secured tariff reductions on various British exports to the US, including vehicles. However, the ethanol aspect of the deal has triggered concern within the UK bioethanol industry.
AB Foods has been lobbying the government for several months, arguing that the influx of subsidised and tax-credit-supported US ethanol—mainly derived from corn and wheat—would harm UK producers. The US ethanol industry, particularly strong in states like Iowa and Nebraska, has received significant government backing and was a major political constituency in the last US election.
The Vivergo plant in Hull is the largest of only two ethanol production sites in the UK. The other, Ensus, located in Teesside and owned by Germany’s Südzucker Group, has also indicated it may be forced to close. Ensus stated the UK-US agreement has “fundamentally undermined its business position.”
AB Foods had set a deadline of Wednesday, 25 June to secure government backing. While it claims this deadline has passed without resolution, the Department for Business maintains that negotiations began on that same day.
The company has made it clear: unless it receives short-term funding to cover Vivergo’s operating losses, along with a long-term solution to ensure competitiveness, the plant will cease production before 13 September.
Coincidentally, the announcement from AB Foods came on the same day the UK government unveiled a new trade strategy intended to boost British exports and shield local industries from cheap foreign imports.
