The tariff deal between the US, UK and Canada could lead to the loss of thousands of jobs due to the bioethanol industry in Hull.
Associated British Foods threatened to shut down one of two UK bioethanol plants if the company did not receive government support. The company said that the government was in negotiations with them over the support but it would begin consulting with the staff at Vivergo Bioethanol “to achieve an orderly winding-down”.
Even though the plant only employs 150 people, the associated agricultural industries could lose up to 4,000 workers in the Humber area.
AB Foods announced that the plant would cease production before September 13.
In an effort to reduce US tariffs, UK officials have agreed to a tax-free limit of up to 1,4 billion litres. The chemical compound is derived from corn, wheat and sugar beet and used to make antiseptics and other products such as food, alcohol drinks, and fuel.
Ensus has announced that it could be forced to close its plant due to its “fundamentally weakened” business position.
After entering into talks with AB Foods about financial assistance on Wednesday, the government expressed “disappointment” at this announcement.
The US is allowed to export duty-free 1.4 billion litres – the same amount of fuel as the UK’s ethanol market. This means that UK businesses will not be taxed if they purchase US fuel.
The government received tariff reductions on UK exports to US, which included British cars.
AB Foods warned ministers about the cheaper US shipments that were coming to the UK for months – even before the trade agreement. Farmers and other producers of fuel in states like Nebraska and Iowa where US President Donald Trump is popular receive tax credits and subsidies.
The Department for Business and Trade said it was only able to begin negotiations with AB Foods the day before the deadline for the company to talk – the 25th of June.
Karl Turner, Labour MP for Hull East said on Wednesday: “To lose the bioethanol market will seriously hinder the UK’s capability to reach net zero, and would devastate community like Hull.”
DBT has hired external consultants to assess and perform due diligence on Vivergo’s plan. A spokesperson stated: “We are taking proactive steps to address long-standing challenges that the company faces… and working to present a plan to protect supply chains, jobs and lifestyles.”
The UK would be left dependent on foreign suppliers if the Vivergo and Ensus plants in Hull, as well as the Ensus site in Teesside, shut down. This is despite the 10% target for all aircraft fuel to come from sustainable resources, including bioethanol.
“We’re willing to potentially put government money in a restructure so that they have a strong future.” – Jonathan Reynolds.
Vivergo warned that the UK bioethanol sector could affect 4,000 jobs, including those of farmers who grow the wheat used to produce the fuel.
Jonathan Reynolds, the Business Secretary of Canada, called Vivergo’s announcement to close “premature”.
He said: “We are willing to engage them and possibly put government money into restructuring to ensure they have a strong future.”
“I regret the decision to begin consultations to let the workers go and to close the factory.” “I think that’s premature because we were in good-faith in those negotiations with them.”
Vivergo says the Hull facility can produce 420 million litres bioethanol using wheat from UK farms.
It described bioethanol as a “key national strategic asset”. This helps reduce petrol emissions and is expected to become a key component of sustainable aircraft fuels in the future.
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