The owner of the UK’s largest bioethanol factory gave the government to come up with a two-week industry rescue package after a trade deal with Donald Trump threatened to swim the UK market with 1.4 billion litres of tariff-free ethanol.
The ultimatum for ABF Sugar, who owns the £450 million Vivergo Plant in the salt end of Hull, was issued after an emergency meeting with British Secretary of Business Jonathan Reynolds and Transport Secretary Heidi Alexander this week.
The owner said they would open consultations on making 160 workers at the factory redundant unless the government submits packages to save the industry within two weeks. Vivergo supports an additional 5,000 jobs in its downstream supply chain.
Keir Starmer’s government ir is under political pressure from Labour lawmakers in the region to save the plants. Nigel Farage’s Reform British Party enjoys a surge in popularity in the region. The reforms won the Hull and East Yorkshire mayoral elections last month.
Paul Kenward, CEO of ABF Sugar, told the Financial Times that investors will no longer support continued losses at the plant.
“Our investors have enough. If the government doesn’t support us, we can’t continue to lose £3 million a month to support the government’s agenda,” he said.
“I can’t go to my board and propose to spend another £50 million unless there’s a copper bottom guarantee that the regulatory regime will change. I have the short-term funds to guide us until these changes take effect,” he said.
Reynolds and his US-based Howard Lutnick said this week that they expected a key part of the US-UK agreement to be implemented “within a few days” and would remove the UK’s de facto 19% tariffs to US ethanol.
Officials from the UK Business and Trade Department have called on industry leaders to be blind to the decision to provide US producers with a tariff-free quota of 1.4 billion litres. This corresponds to the overall annual demand in the UK.
Since then, the industry has been consulting with the government about the potential support and regulatory changes needed to expand the UK bioethanol market, but so far there has been no agreement.
Reynolds said on May 14 that the government “recognized the importance” of the sector used in the UK’s “E10” gasoline to reduce emissions from cars.
The Vivergo plant, which opened in 2012, has only made profits for six months since the introduction of the E10 Mandate in 2021.
Growers claim that a change in regulations in 2022, which provides double subsidies for ethanol produced from waste and not crops, opened the door to flooding of ethanol, which was already a subsidized by-product of subsidies-subsidized US corn production.
Kenward said that the same European plants as the UK plants (which produce about 750 million liters of ethanol per year) are profitable as they are protected from US imports.
“The Department of Transport has perpetuated our end, and the Bureau of Business and Trade is now accelerating it,” said Ben Hackett, managing director of Vivergo. “They are pushing us against the cliffs, and it seems that the government is being decarbonized by industrialization,” he said.
Even before the trade agreement with Washington is signed, there is growing frustration at the government’s failure to take steps to improve the viability of the British industry.
The industry is urging governments to increase the size of their markets by moving to the “E15” petrol blend used in many other countries. Revising regulations will provide short-term grants of up to £75 million a year to help them survive the industry until measures to maintain unfair competition and promote growth are in effect.
Reynolds told MPS this week that the government is aware of the “competitive pressure” brought about by US deals and is working with the transportation sector to provide regulatory changes.
Meanwhile, pressure continues to be provided to governments from local MPs and industry groups that rely on by-products from plants, such as high-protein animal feed and carbon dioxide gas used in the drink and meat packaging industry.
William Bain, director of trade policy at the UK Chamber of Commerce, added that US transactions have caused “a major headache” for domestic industries and that clarity of government support is “urgently needed.”
Tom Reid, CEO of the Renewable Transport Fuel Association Lobby Group, said the growing popularity of hybrid vehicles has led to an increase in demand for gasoline in the UK, meaning bioethanol is a key part of the transition to fully electric vehicles.
Luke Campbell, a recently elected combination authorities between Hull and East Yorkshire, has campaigned locally on the issue and has written an open letter to warn that his US trade contract is “a bad deal for UK industry and work.”
Local Labour MP Carl Turner, who seated the July 2024 election ahead of the reform candidate, led a delegation of workers to London this month to protest outside the parliamentary home.
Factory workers said they knew their work was hanging from the thread and urged the government to intervene.
“It’s not great that your government is throwing you under the bus,” said operations engineer Paul Snuggs, 60. “Not only 160 people on the site, but 4-5,000 people in the supply chain.”
Andy Gardner (53), a systems control engineer who has worked at the site for 12 years, said, “I understand that (US-uk) contracts are to save UK jobs, but if you’re sacrificing so many UK jobs in the process, you have to ask if you’ve thought of it.”
