Vivergo, one of two UK bioethanol plants, has ceased production and will start laying off its 160 employees on Tuesday.
After weeks of talks, the government said on Friday it would not be providing financial support for the bioethanol sector, which is facing increased competition from imported US ethanol.
Vivergo, owned by Associated British Foods, said that would have meant continuing as a “heavily loss-making” business. As a result it is closing, with all staff due to be gone and the site ready for demolition by end of the year.
The government said it had decided a rescue would not provide value for taxpayers or solve the industry’s long-term problems.
Bioethanol, can be made from waste oil or grains and is used as an additive to fuels, to reduce climate-damaging emissions. For example it is added to E5 and E10 petrol and sustainable aviation fuel.
In May the UK signed a trade deal which removed 19% tariffs on US-imported ethanol up to a quota of 1.4bn, roughly eqivalent to the size of the UK market.
It was one of the concessions made by the UK as part of a broader trade pact, that eased the tariffs that President Donald Trump had said he would impose on UK car and steel being imported across the Atlantic to the US.
Even before that trade agreement, the UK sector had complained that US imports had an unfair financial advantage as their ethanol is certified as a waste byproduct in the UK, whereas domestically-produced bioethanol is not.
Vivergo is one of two bioethanol sites in the UK which has said without support it will be forced to close.
The BBC understands that the other plant in Redcar, Teesside, which is owned by German firm Ensus, is waiting to hear whether the government will provide support to protect its CO2 production, a product widely used in industry, food production and healthcare.
Vivergo had also been planning to start capturing CO2 produced as part of the bioethanol making process, but had not yet started.
Ben Hackett, Vivergo’s managing director described the government’s decision not to provide a rescue package as a “massive blow to Hull and the Humber”.
He said the government had decided the bioethanol sector was something that could be “traded away” and that it amounted to a “flagrant act of economic self-harm”.
As well as the loss of its own staff, Vivergo warned there would be a knock-on effect on suppliers and customers. It would be hard for UK farmers to find alternative customers for wheat which is not food-grade, Mr Hackett said.
Andrew Symes, the chief executive of OXCCU, which makes sustainable aviation fuel, told the BBC’s Today programme that the closure would make the UK reliant on imports for CO2 and for ethanol, which he described as “risky”.
“I think that was probably what wasn’t realised when the trade deal was done,” he said.
The government said it had taken the decision “in the national interest” and that the tariff deal with the US had protected “hundreds of thousands of jobs in sectors like auto and aerospace”.
A government spokesperson said it would work to support the companies through the closure process and that it was continuing to work on proposals that would “ensure the resilience of our CO2 supply in the long-term”.
Charlotte Brumpton-Childs, GMB National Officer, said the government’s commitment to green policies should mean a commitment to green jobs.
“A clean energy industrial strategy means nothing if we cannot protects plants long enough to deliver clean energy jobs here in the UK,” she said.