The owner of the UK’s biggest bioethanol plant has given the government two weeks to come up with a rescue package for the industry after the trade agreement with Donald Trump threatened to swamp the British market with 1.4bn litres of tariff-free ethanol.
The ultimatum by ABF Sugar, which owns the £450mn Vivergo plant in Saltend, Hull, was issued following an emergency meeting this week with the UK business secretary Jonathan Reynolds and transport secretary Heidi Alexander.
The owners said unless the government tabled a package to save the industry within two weeks, they would open consultations about making the plant’s 160 workers redundant. Vivergo supports a further 5,000 jobs in downstream supply chains.
Sir Keir Starmer’s government is under political pressure from Labour MPs in the area to save the plant. Nigel Farage’s Reform UK party has enjoyed a surge in popularity in the area; Reform won the Hull and East Yorkshire mayoral election last month.
Paul Kenward, chief executive of ABF Sugar, told the Financial Times that investors would no longer support continued losses at the plant, which was already struggling before the US-UK trade pact was announced on May 8.
“Our investors have had enough. We cannot continue to lose £3mn a month to support a government agenda when the government isn’t supporting us,” he said.
“I can’t go to my board and suggest they spend another £50mn unless I have a copper-bottomed guarantee that the regulatory regime will change, and there is short-term funding to get us through to the point those changes take effect,” he said.
Reynolds and his US counterpart Howard Lutnick said this week they expected key parts of the US-UK pact to be implemented “within days”, removing the UK’s current de facto 19 per cent tariff on US ethanol.
Officials at the UK Department of Business and Trade admitted in calls to industry leaders that they had been blindsided by the decision to offer a 1.4bn litre tariff-free quota to US producers — equivalent to the entire annual demand in the UK.
Since then, the industry has been in talks with the government over potential support and regulatory changes needed to expand the UK bioethanol market, but so far nothing has been agreed.
Reynolds said on May 14 that the government “acknowledged the significance” of the sector, whose product is used in UK “E10” petrol to reduce emission from cars.
The Vivergo plant, which opened in 2012, has only made a profit for six months since the E10 mandate was introduced in 2021, which the industry blames on the way the UK bioethanol market is regulated.
Producers argue that changes to regulations in 2022 that offered double subsidies to ethanol produced from waste products, not crops, opened the door to a flood of ethanol made as a byproduct of US corn production, which is already subsidised.
Kenward said that plants in Europe identical to those in the UK — which produce about 750mn litres of ethanol a year — were profitable because they were shielded from US imports.
“The Department for Transport was perpetuating our demise and the Department for Business and Trade is now accelerating it,” said Vivergo managing director Ben Hackett. “They’re pushing us towards the precipice. It’s like the government is decarbonising by deindustrialising,” he said.
Even before the trade pact with Washington was signed, frustration has been growing over the government’s failure to take steps to improve the viability of the UK industry, which also includes a plant owned by Ensus in Wilton on Teesside.
The industry is asking the government to increase the size of the market by moving to the “E15” petrol blend used by many other countries, revising regulations to keep out unfair competition and provide short-term subsidies of up to £75mn a year to tide the industry over until the growth-enhancing measures take effect.
Reynolds told MPs this week that the government recognised the “competitive pressures” that the US deal would bring and that he was working with the transport department to deliver regulatory changes.
Meanwhile pressure continues to build on the government from local MPs and industry groups that rely on byproducts from the plants, including high protein animal feed and carbon dioxide gas used in the drinks and meat packing industries.
William Bain, the head of trade policy at the British Chambers of Commerce, said the US deal had caused “a huge headache” for the domestic industry, adding that clarity on government support to the sector was “urgently needed”.
Tom Reid, chief executive of the Renewable Transport Fuel Association lobby group, said the growing popularity of hybrid cars meant that demand for petrol was increasing in the UK and bioethanol was a vital part of the transition to fully electric vehicles.
Luke Campbell, the recently elected Reform mayor of the Hull and East Yorkshire Combined Authority, has campaigned locally on the issue, writing an open letter to Starmer warning that his US trade deal is a “bad deal for British industry and jobs”.
Local Labour MP Karl Turner — who held his seat at the July 2024 election ahead of a Reform candidate — led a delegation of workers to London this month to protest outside the Houses of Parliament.
Workers at the plant said they were aware that their jobs were hanging by a thread and urged the government to step in.
“It’s not great when you have your own government throwing you under the bus,” said Paul Snuggs, 60, an operations technician. “It’s not just 160 jobs on the site, it’s four to five thousand in the supply chain.”
Andy Gardner, 53, a systems control engineer, who has worked 12 years on the site, said: “I understand the [US-UK] deal is there to save British jobs — but if they’re sacrificing so many British jobs in the process, you have to ask whether they’ve thought it through.”
