Associated British Foods (AB Foods) has announced that it may shut down its Vivergo bioethanol plant in Hull unless it receives government support. This warning follows the UK governmentโs recent agreement to remove tariffs on US ethanol imports, posing a significant threat to domestic biofuel production.
Government Tariff Changes
The governmentโs decision to eliminate a 19% tariff on US ethanol imports has paved the way for American producers to export up to 1.4 billion litres tax-free, thereby undermining the competitive position of the UKโs ethanol industry. Amid this context, AB Foods revealed that it will initiate consultations with its 150 employees at the Vivergo facility in Hull to prepare for a possible โorderly wind-downโ of operations.
A spokesperson for the Department for Business expressed disappointment at the timing of AB Foodsโ announcement, noting that discussions regarding financial support had commenced just days earlier.
Broader Industry Concerns
Vivergo is the largest bioethanol plant in the UK, and its potential closure raises alarms across the industry. The only other operational facility in the UK, ensuring bioethanol production, is Ensus on Teesside, owned by Germanyโs Sudzucker Group. Ensus has similarly indicated that it might face shutdown due to the adverse impacts of the UK-US trade agreement on its business viability.
The agreement allows for duty-free imports of US ethanol, effectively saturating the UK market and potentially leading to a collapse of local production. โThe terms fundamentally undermine our business position,โ a representative from Ensus noted.
Impact on the Bioethanol Market
The Vivergo plant has historically been a key player in the UKโs bioethanol sector, primarily sourcing its feedstock from local wheat farmers. However, the new tariff structure favors US farmers significantly, who benefit from government-led subsidies and tax credits, enhancing their ability to compete in global markets.
This trade arrangement has been perceived as a major victory for US agricultural interests, especially in key ethanol-producing states such as Iowa and Nebraska, which form a crucial part of the political support base for former President Donald Trump.
Calls for Government Intervention
AB Foods has urged the government for immediate assistance, including short-term funding to cover operational losses and a longer-term strategy to sustain the plant. The company has set a deadline of September 13 for these crucial negotiations to yield results, signaling possible layoffs and disruptions if an agreement is not reached.
On June 25, Labour MP Karl Turner voiced his concerns, stating, โTo lose our bioethanol market would seriously hamper the UKโs ability to reach net zero and devastate communities like Hull in the process.โ
Potential Future Developments
In preparation for a possible contingency plan, the Department for Business is engaging external consultants to evaluate options for Vivergo. This move aligns with the governmentโs goal of ensuring that 10% of aviation fuel comes from sustainable sources by 2030, among which bioethanol is a key component.
However, if both Vivergo and Ensus were to close, the UK could become increasingly reliant on imported bioethanol, jeopardizing domestic jobs and supply chains. AB Foods has confirmed that its wheat purchasing halt began on June 11, further signaling the urgency of the situation.
The outcome of these negotiations could not only shape the future of bioethanol production in the UK but also affect thousands of jobs across the agricultural supply chain, leading to broader economic implications for regions dependent on this industry.
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