Associated British Foods has threatened to close one of the UK’s two bioethanol plants if it does not receive state support after the government struck a tariff deal with the US.
It said while the government has committed to “formal negotiations”, it will begin consultations with 150 staff at its Vivergo bioethanol business in Hull “to effect an orderly wind-down”.
As part of an agreement to cut US tariffs, the government said it will remove a 19% tariff on exports of ethanol to the UK, and replace it with a tax-free quota of up to 1.4 billion litres of the fuel.
AB Foods said unless help is provided, Vivergo will stop manufacturing before 13 September.
The Vivergo bioethanol plant is the UK’s biggest. The only other plant making the fuel in the UK is Ensus in Teesside, which is owned by Germany’s Sudzucker Group.
Ensus has also said it may have to shut its site because the UK-US trade agreement “fundamentally undermined its business position”.
Under the tariff deal, the US can export 1.4 billion litres of the fuel – equal to the UK’s entire ethanol market – duty free, which means businesses in Britain do not have to pay tax if they buy the American fuel.
In return, the government secured tariff cuts on UK exports to the US.
AB Foods set a deadline of 25 June to reach an agreement with the government about support.
“Yesterday, our extended deadline for the government to deliver that solution passed,” the company said.
While talks are continuing, AB Foods said: “Unless the government is able to provide both short-term funding of Vivergo’s losses and a longer-term solution, we intend to close the plant once the consultation process has completed and the business has fulfilled its contractual obligations.”
The BBC has contacted the government for comment.