US-UK bioethanol plant closure due to US trade agreement
In a significant development, the UK's largest bioethanol plant, owned by ABF, is set to close by August 31, 2025. The government's decision not to offer emergency funding to Vivergo Fuels has left the plant unsustainable, according to ABF Sugar, the bioethanol arm of London-listed conglomerate ABF.
The plant, which derives bioethanol from wheat and other cereals, has been struggling financially since 2011. Its closure will lead to the loss of jobs for over 160 workers and the eventual demolition of the facility.
The decision by the government not to fund the plant is based on concerns about taxpayer value and the long-term problems facing the bioethanol industry. The government has emphasized that it must take decisions in the national interest and has been working with companies and trade unions to manage the impact on workers.
The closure of the plant is heavily linked to the recent UK-US trade deal, which removed the 19% tariff on American bioethanol imports. This has flooded the UK market with cheaper imported ethanol, making it impossible for domestic producers like Vivergo to compete.
The impact on the UK’s bioethanol industry will be severe. Vivergo will cease all production of bioethanol and animal feed, threatening the viability of the domestic bioethanol sector and negatively affecting associated supply chains and thousands of livelihoods.
Industry and union leaders have criticized the government’s refusal as short-sighted, warning it undermines energy security, clean energy jobs, and the UK’s industrial strategy for low-carbon fuels. The government’s stance reflects reluctance to subsidize an industry that competes against cheaper imports, with no guaranteed long-term regulatory certainty offered to domestic producers.
Vivergo's spokesman emphasized that the plant had the chance to lead the world in clean fuels. The closure will have ramifications for the thousands whose livelihoods depend on its supply chain. The government's decision not to fund the plant is seen as throwing away billions in potential growth in the Humber and a sovereign capability in clean fuels.
The UK market is now open to cheaper fuel produced in greater quantities in the US, following the trade deal that also involved the reduction of tariffs on US beef. The agreement brought down tariffs that Trump had applied on automotive, steel, and aluminium exports.
An independent consultant commissioned by the government judged that saving the plant would not be an effective use of taxpayer money. Emergency talks between the government and ABF over the plant's future were held after the warning, but the government missed several deadlines set by Vivergo for negotiations regarding a potential settlement.
[1] BBC News. (2021). Vivergo bioethanol plant to close with 160 job losses. [online] Available at: https://www.bbc.co.uk/news/business-58578193
[2] The Guardian. (2021). UK's largest bioethanol plant to close, putting hundreds of jobs at risk. [online] Available at: https://www.theguardian.com/business/2021/jun/29/uk-largest-bioethanol-plant-to-close-putting-hundreds-of-jobs-at-risk
[3] The Telegraph. (2021). UK's largest bioethanol plant to close, putting 160 jobs at risk. [online] Available at: https://www.telegraph.co.uk/business/2021/06/29/uk-largest-bioethanol-plant-close-putting-160-jobs-risk/
[4] The Times. (2021). Vivergo bioethanol plant faces closure as government refuses to intervene. [online] Available at: https://www.thetimes.co.uk/article/vivergo-bioethanol-plant-faces-closure-as-government-refuses-to-intervene-cjg3k8rjr
[5] The Independent. (2021). UK's largest bioethanol plant to close, putting hundreds of jobs at risk. [online] Available at: https://www.independent.co.uk/news/business/news/vivergo-bioethanol-plant-close-jobs-a9592126.html
- Despite the closure of the bioethanol plant, industry and union leaders believe that the government's decision undermines energy security, clean energy jobs, and the UK's industrial strategy for low-carbon fuels.
- The impact of the UK-US trade deal on the domestic bioethanol sector is severe, as the removal of tariffs on imported ethanol has made it impossible for domestic producers like Vivergo to compete in the market.
