How PM's trade deal with Trump could bring an industry to its knees

Times

a day ago

Against a slab-grey sky, workers and dockers left Hull's Saltend chemical park in a sombre mood on Friday, as news spread of the government's decision not to rescue the country's largest bioethanol plant.
Somewhere inside this 370-acre nest of cooling towers, storage tanks, reactor towers and distillation columns is Vivergo Fuels, the country's largest bioethanol producer, which on Tuesday will start dismantling its equipment and shutting down.
'Somebody has to buy them out, surely?' said Mahmud Hoque, 65, an assistant port master who unloads the 5,000-tonne chemical deliveries needed by Vivergo — pumped from ships that come from the Netherlands and Italy into dome-like storage tanks at the plant.
Bioethanol is an essential ingredient of E10 unleaded petrol, used by millions of drivers up and down the country.
'There's been a lot of worried people here in the past few weeks,' Hoque said. 'This is not good news for anyone — the workers, the dockers, everybody who works here in the supply chain.' Another worker said: 'A lot of people left here early today. I can't say I'd blame them. I'd be straight down the pub.'
Other locals said there would be a lot of upset people in Hull, as many families counted on jobs at the firm. Jesse, 30, a quality engineer who was enjoying a drink with friends at the Kingstown pub close to the plant, said: 'I've got some friends who work there. Lots of people swapped their jobs at Siemens UK [which makes wind turbines nearby] to go and work at Vivergo, because there were more day shifts and the pay was better. It's really upsetting to hear the news of them closing down.'
Another of the group said: 'It's not good news for the city.'
A Vivergo company source confirmed this week's closure. 'Workers will come in and start dismantling the equipment on Tuesday,' said the source. 'There's no going back.'
About 170 jobs will go at the plant, as well as 4,000 roles in the supply chain, according to the company's claims — figures that are disputed by government officials.
The decision comes after the Labour government withheld financial aid following its trade deal with the US, which will allow 1.4 billion litres of tariff-free bioethanol from America to flood the UK market. The tariff had been 19 per cent.
Vivergo, which is owned by Associated British Foods (ABF), said the choice not to support a 'key national asset' was 'deeply regrettable'.
Bioethanol is made from wheat, corn or sugar beet, and many farmers in the Lincolnshire area — such as Matt Pickering, who made Vivergo's final wheat delivery — will be affected. 'This is going to hit the farm hard,' he told The Sunday Times on Friday.
Workers' unions last week accused the government of 'choosing to effectively ship jobs abroad'.
A second plant, operated by the German-owned Ensus in Redcar, Teesside, is also at risk. However, insiders claim its position is different to Vivergo's. Ensus makes a third of the UK's commercial carbon dioxide, a byproduct of bioethanol, used in fizzy drinks as well as the medical and nuclear industries.
Ensus's negotiations with the government are ongoing. Ben Houchen, the Conservative mayor for Teesside, said: 'As soon as the US trade deal came in, we knew it was trouble for the ethanol trade. I don't know how a government can give a deal that so massively undercuts the industry.'
The closure of Vivergo and loss of jobs in Hull is the real-world effect of an agreement between Sir Keir Starmer and President Trump aimed at saving thousands of British jobs in the car and steel industries. But it will arguably sacrifice the bioethanol trade, as well as putting pressure on British beef farmers, due to an agreement to accept 13,000 tonnes of duty-free US beef.
Starmer was said to be watching his beloved Arsenal FC play in the Champions League in April when Trump called. The president had a request: would the UK be willing to make concessions on US exports of ethanol and pork in exchange for a deal? It was typical last-minute pressure from Trump, a real estate businessman hoping to squeeze every last drop out of the deal.
After consulting with officials and Jonathan Reynolds, the business and trade secretary, Starmer conceded on ethanol but ruled out anything on pork. Later on in the match, Trump called back. He told Starmer that he had a deal and an announcement would be made in the Oval Office the next day. 'He was watching Arsenal when he gave the whole industry away,' said a Vivergo source.
• How Trump's 11th-hour call to Starmer won trade deal concession
After the deal was struck, the bioethanol industry began desperately lobbying for help.
Initially, there was much to be hopeful about. Just weeks before that deal, the British government had stepped in to save British Steel and its steelworks in Scunthorpe, amid concerns that its Chinese owner, Jingye, would close down the UK's only remaining blast furnaces and put thousands of jobs at risk.
The Labour government received praise for its actions in the town — from workers and union officials alike — after MPs and peers were called back from their Easter holidays to pass legislation allowing ministers to take control.
Reynolds said full nationalisation for British Steel was a likely next step, but to date, Jingye is holding out for a payment from British taxpayers worth hundreds of millions. Negotiations continue. But so far, the move has saved the steelworks.
While steel manufacturing was considered of national strategic importance by the government, bioethanol has not been afforded the same status. Vivergo sources said the government needed to expand the sector further in the UK — opening up bioethanol for a new 'E15' product that would contain 15 per cent bioethanol for use in car as well as aircraft fuel.
Accountants and officials reporting to Sarah Jones, the minister for industry in Reynolds' department, began examining Vivergo's books as the government weighed the possibility of a bailout. Those accounts show that Vivergo got off to an inauspicious start.
The company began life in 2007 as a joint venture between ABF, BP and DuPont of America. There were a number of teething problems, and it took until the second half of 2013 for the Hull plant to begin continuous production.
By 2017, ABF had bought out both its partners, only to close the plant again the next year, blaming high wheat costs and low bioethanol prices. It did not reopen again until April 2022.
The accounts show the company has made a profit only twice since 2007. Government sources also claimed that its research found the number of people affected by the supply chain would be '5 per cent' of the figure that Vivergo was claiming.
'We know there's direct jobs that will be lost — and those have been at the forefront of ministers' minds — but in terms of the supply chain, our analysis does not match what Vivergo has said,' a government source said.
Jones made early-morning calls on Friday to executives from Vivergo and Ensus. They did not come as a surprise; they had been notified of the discussions the night before. But before they actually took the call, Vivergo executives are said to have been told about the government refusing a bailout by a TV reporter.
'This is a massive blow to Hull and the Humber,' said Ben Hackett, managing director of Vivergo Fuels. 'We have fought from day one to support our workers and we are truly sorry that this is not the outcome any of us wanted.
'This decision by ministers will have a huge impact on our region and the thousands of livelihoods in the supply chain that rely on Vivergo, from farmers to hauliers and engineers.'
He said that the US-UK trade deal had pushed the bioethanol sector to the point of collapse due to the removal of the 19 per cent tariffs. 'They acted as a corrective measure in the face of a product that the US government heavily subsidises.'
According to Vivergo sources, that means customers are now going to US producers because the product is cheaper. 'And who can blame them?' they said.
Despite heavy criticism from the industry, and locally in Humberside, the government maintains that its trade deal with the US has secured far more jobs — an estimated 320,000 — in sectors such as pharmaceuticals and aerospace, as well as automotive, providing a lifeline for the likes of Jaguar Land Rover.
British Steel was also supposed to benefit from 25 per cent tariffs on UK steel and aluminium being dropped — a move that could help safeguard jobs in Scunthorpe. However, no final agreement on this has been made public, due to US security and supply-chain concerns, meaning steel tariffs remains at 25 per cent.
Concessions in other industries will be of little consolation this weekend to the families of those working at Vivergo.
Tim Doggett, chief executive of the Chemical Business Association, said: 'This decision threatens nearly 300 direct jobs at the UK's two bioethanol plants, but the true impact is far greater.
'Losing this capability is not in the national interest. It will weaken resilience and force the UK to rely even more on imports at the very time we need secure homegrown supply chains.'
Sir Keir Starmer was watching Arsenal play one Wednesday night when he took a phone call from US President Donald Trump. The US and the UK were in the final stages of striking a trade agreement that would alleviate tough new tariffs on British goods going into America. The goal was to protect exports of British cars and steel — but Trump had a new demand. Would Starmer make further concessions on US exports of ethanol and pork in exchange for a deal? The prime minister conceded on ethanol but not pork. The president agreed.
In an occasionally chaotic press conference in the Oval Office the next day, Trump announced the trade agreement. Lord (Peter) Mandelson, the UK ambassador to the US, was by his side. 'I think it's going to be something very special for the UK and special for the United States,' said Trump.
Within hours it had become apparent that, while the deal brought some relief for Britain's carmakers, the bioethanol industry had been left exposed by the agreement to let American companies ship 1.4 billion litres of ethanol to Britain each year, free of tariffs — a figure equating to the size of the UK's entire ethanol market. ABF, owner of Vivergo, said that for the 'strategically essential' sector of domestic bioethanol production, 'it is now clear that the deal has triggered an existential threat'.
ABF Sugar's chief executive, Paul Kenward, appeared before MPs in Westminster to warn the trade deal would destroy the UK bioethanol industry. 'ABF alone has invested £700 million in that site. Once it goes, it goes,' he said. 'We will be writing off all of that, it will be gone, and it will not be built again. That will have a devastating impact on investor confidence.' ABF workers descended on Westminster to lobby politicians.
ABF began a consultation on the future of the Vivergo site while pressing ministers to agree support such as a medium-term subsidy and steps to stimulate demand for bioethanol over the long term. In the same week, the government launched its industrial strategy, promising to invest in the green economy.
ABF, a FTSE 100 company that also owns Primark, made a last-ditch appeal to ministers warning it would have to close Vivergo by August 18 without help to stem losses running at £3 million a month.
The government confirmed there will be no bailout Vivergo. 'It would not provide value for the taxpayer or solve the long-term problems the industry faces,' said the Department for Business.