‘Economic self-harm' leads to closure of UK's biggest bioethanol plant

Times

a day ago

Britain's biggest bioethanol plant is shutting down with the loss of 160 jobs after the UK-US trade deal opened up the market to cheaper imports from America.
Vivergo Fuels, which is owned by Associated British Foods, said it had no choice but to close its site on the Saltend Chemicals Park near Hull after the government took the 'deeply regrettable' decision 'not to support a key national asset'. It had been seeking taxpayer support for the plant, which has been losing £3 million a month.
Ben Hackett, the managing director of Vivergo Fuels, said: 'The government's failure to back Vivergo has forced us to cease operations and move to closure immediately. This is a flagrant act of economic self-harm that will have far-reaching consequences. This is a massive blow to Hull and the Humber.'
The fate of a second bioethanol factory, Ensus UK, which operates at the Wilton International site near Redcar and is owned by Germany's CropEnergies, is also hanging in the balance. However, it remains in talks with the government over whether the plant, which employs about 100 workers, can continue as the UK's maker of CO₂ — a byproduct of bioethanol production that is used in everything from fizzy drinks to NHS operating theatres.
Both companies have been warning of the risk of closure since Sir Keir Starmer's trade deal with President Trump in May cut to zero the UK's 19 per cent tariff on up to 1.4 billion litres of US bioethanol imports a year. That is roughly equivalent to the UK's entire annual consumption.
On the insistence of the US president, who is keen to preserve American farming jobs, the prime minister agreed to a last-minute concession, blindsiding the two companies that make up Britain's bioethanol industry. They produce green fuel from non-food grade wheat that is used in E10 petrol — which is fossil-fuel petrol containing up to 10 per cent renewable ethanol, to lower its emissions. The companies also make animal feed.
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The trade deal prompted months of negotiations over a potential bailout but Jonathan Reynolds, the business secretary, has now decided that he cannot justify propping up the sector with taxpayer subsidies. The news was broken to the companies in a meeting with Sarah Jones, the minister for industry.
In a statement, the government said that it always took decisions in the national interest: 'That's why we negotiated a landmark deal with the US which protected hundreds of thousands of jobs in sectors like auto and aerospace.'
It said it had 'worked closely' with the two companies since June 'to understand the financial challenges they have faced over the past decade, and have taken the difficult decision not to offer direct funding as it would not provide value for the taxpayer or solve the long-term problems the industry faces'.
Paul Kenward, chief executive of ABF Sugar, has long said, even before the trade deal, that the sector's difficulties have been caused by government regulation that favoured US exporters.
A spokesman for ABF said: 'We presented a clear plan to restore Vivergo to profitability within two years under policy levers already aligned with the government's own green industrial strategy. The government has thrown away billions in potential growth in the Humber and a sovereign capability in clean fuels that had the chance to lead the world. Jobs in clean energy will now move overseas.'
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ABF, which has invested more than £700 million in Vivergo over the past decade, added: 'This plant should always have been profitable under the right regulatory environment, as similar plants in western Europe demonstrate.'
The company, which said that its supply chain supports '4,000 livelihoods', was also 'hugely disappointed' that 'the press was informed of this decision before we were told — and before we had a chance to communicate to our staff'.
Supporters of the government's decision pointed out that ABF, which also owns the retailer Primark, is controlled by the billionaire Weston family, who could have put in more funds.
The government offered a possible reprieve to Ensus, which is ahead of Vivergo when it comes to CO₂ production, saying: 'We also continue to work up proposals that ensure the resilience of our CO₂ supply in the long term, in consultation with the sector.'
Grant Pearson, chairman of Ensus UK, said that at the meeting with Jones, she confirmed that the government values 'our production of biogenic CO₂ which is a product of critical national importance. They are therefore looking at options to secure an ongoing supply of CO₂ from the Ensus facility.' He said, however, that it will 'take time' to agree 'an acceptable long-term arrangement'.
The closure of Vivergo Fuels in Hull is more than the loss of a plant (Paul Kenward writes). It is a warning about how Britain risks closing itself off from the future fuels revolution, and how, in the process, UK PLC risks squandering a real opportunity to create high-quality green industrial jobs.
For Hull, bioethanol should have been the start of a green industrial revolution: a hub for low-carbon fuels serving UK transport, shipping and aviation, with skilled employment, investment in infrastructure and growth for the region's farmers and suppliers. Instead, that future will now happen overseas — in countries with which Britain competes for increasingly scarce investment and growth.
I am, of course, deeply saddened for our 160 colleagues who are losing their jobs, and for the thousands more across the supply chain — from the farmers at the 12,500 farms supplying our wheat to the hauliers, engineers and contractors whose livelihoods depend on the plant. They will no doubt be deeply frustrated, as I am, at the ministerial inaction that has led us to this point.
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Over the past decade ABF has invested more than £700 million in Vivergo, sustaining it through extended losses caused by policy distortions unique to the UK. Under competitive and stable market conditions, bioethanol could and should be a hugely profitable sector. All we needed from the government, since the shock of the trade deal that gave away the entire market to subsidised US competitors, was time-limited support to bridge the period until regulatory changes, already in line with the government's stated direction, were in place.
For several years a UK-only regulatory loophole gave foreign producers an artificial price advantage in our own market. No other country applies such a rule to its domestic producers. Then, in May, the surprise removal of the 19 per cent tariff on US ethanol imports as part of the trade deal, done with no notice and no transition plan, made it impossible for UK plants to compete in their own market. If Vivergo had been in Rotterdam, where these distortions do not exist, it would be successful.
The result of the refusal to support Vivergo is a message to investors that the UK is willing to cede sovereign fuel capabilities to overseas competitors, even in sectors directly aligned with its growth and net-zero priorities. The cost of doing business in UK regulated sectors is becoming too high, not because the industries lack potential but because unpredictable policy shifts and regulatory inconsistency make it too risky to commit long-term capital.
This is about more than one plant. Future fuels, from sustainable aviation fuel to advanced biofuels, are a huge global growth opportunity. Other countries are locking in their share. In the US, a clear policy framework has driven record bioethanol output and exports, underpinned rural economies and attracted billions in private investment. Across the EU bioethanol production is growing.
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The UK could have been part of this story. Saltend Chemicals Park, where Vivergo is based, has the potential to generate £24.2 billion in GVA (gross value added) by 2050, rising to £50 billion with planned investments. That included a signed memorandum of understanding with Meld Energy for a £1.25 billion sustainable aviation fuel facility, projected to add £7.3 billion to the economy over its lifetime. But with Vivergo gone, the domestic ethanol supply this project depended on will no longer exist. That means the investment may now go abroad, along with the jobs, skills and growth it would have brought to the UK.
The government had a clear window to safeguard a strategic industry and chose not to take it. Failing to act now sends the wrong message: that Britain is content to become an import-only market for the very fuels and technologies it will depend on to hit net zero. It signals to investors that they must factor in the risk that future policy changes or trade deals could abruptly undermine entire sectors — making every emerging clean energy industry, from sustainable aviation fuel to hydrogen, a more uncertain and risky investment.
Vivergo's closure should not close the conversation, but unless the government acts now, the UK's green industrial future will be built abroad. The investment, jobs and skills that could have been anchored in places like Hull will instead flow to countries with clearer, more consistent regulatory regimes. Britain will end up importing fuels and technologies it could have produced at home, paying a premium for the privilege, and watching the economic opportunity of a generation slip through its fingers.
Paul Kenward is the chief executive of ABF Sugar, parent company of Vivergo Fuels