ABF blames the recent UK-US trade deal for contributing to the worsening of the country’s bioethanol challenge.
Britain’s biggest bioethanol plant, Vivergo, is threatening to shut down one of the UK‘s two bioethanol plants if the government does not offer it adequate support. Associated British Foods (ABF), the company which owns Vivergo, had warned the British government that the tariff deal it had finalised with the US threatens the industry’s domestic survival.
ABF warned that it would close down its Hull site in September, jeopardising 160 jobs. The company is embroiled in negotiations with the government regarding the Vivergo plant’s future, but the result of these deliberations remains ‘uncertain’. Therefore, the food producer has hinted to the staff that operations could eventually be phased out.
ABF is also the owner of the Primark clothing chain and Kingsmill bread. It blames the recent UK-US trade deal for contributing to the worsening of the country’s bioethanol challenge. Bioethanol is a petrol substitute made from agricultural products and is a renewable fuel. Made from grains like maize, corn and sugar beets, bioethanol producers in the US have been incentivised with subsidies and tax credits.
In order to appease US President Donald Trump, who had threatened tariffs across all European countries, the UK government brought down tariffs on US-imported ethanol from 19% to zero. As part of this agreement, the US can export 1.4 billion litres of the fuel, which is the exact volume of the UK’s entire ethanol market. These duty-free imports would exempt British businesses from paying taxes if they opt to purchase American fuel.
ABF had been lobbying against the import of cheaper US fuel imports for months before this deal was struck. Industry experts had warned British Prime Minister Keir Starmer that such a move would surely result in the closure of two of the country’s biggest fuel-making plants, rendering hundreds of people around north-east England and Yorkshire without a job. Vivergo uses locally sourced wheat to produce bioethanol, but ABF said on June 11th that it was no longer buying wheat.
Like Vivergo, the German-owned Ensus, which belongs to the Südzucker Group, produce and supplies nearly all of Britain’s bioethanol. ABF and Ensus had cautioned Starmer since May against accepting such an agreement, as it would surely harm the island’s agrofuel industry. However, the Labour government went ahead with the deal anyway, and the Trump administration subsequently slashed the tariff rate on British steel and aluminium exports from 25% to zero.
The government, however, refuses to accept that the plant’s closure is prompted by the trade deals, maintaining that the bioethanol industry has been facing significant challenges for a prolonged period, much before the deal with Washington was finalised. The Guardian reported that an ABF spokesperson said that the company would engage in intense negotiations with the government to forge a path ahead. However, the bioethanol plant has to grapple with the possibility of closure and will also remain in consultation with the staff.
While ABF had initially sought to decide the plant’s future on Wednesday, it extended the deadline by 24 hours in the hope that the government would offer a support package. However, it had informed investors earlier that if Starmer’s government could not offer long-term support, then the Hull plant would shut down by September 13th, once it completes all its contracts and ends all consultations with the employees.
A Downing Street spokesperson told The Guardian that government officials and ministers had been discussing solutions to the challenges faced by ABF for months now, and therefore, news of the plant closure is certainly disappointing. The government was also looking into providing financial support for the company. However, regardless of ABF’s decision, the Labour government has maintained that it intends to work closely with the industry to protect jobs, supply chains and British interests.
