Vivergo’s plant produces bioethanol, a renewable fuel, important for domestic production of sustainable aviation fuel - A.P.S. (UK)/Alamy

Ministers are racing to save Britain’s largest bioethanol plant after the owner warned it would be forced to close the site without state intervention.

On Thursday, Associated British Foods (ABF) said it had entered into last-ditch talks with the Government about securing support for its Vivergo Fuels business in Hull, which is losing £3m a month.

Jonathan Reynolds, the Business Secretary, also confirmed he was engaging “in good faith” with the company and could commit taxpayer money to a rescue package.

If the negotiations fail, ABF’s bosses have threatened to close the factory by Sept 13.

The company has accused ministers of rendering its business unprofitable by awarding subsidies to rival American producers.

Bosses had previously warned they would decide this week whether to close the plant, which makes bioethanol for blending into petrol and employs around 150 people.

But ABF said it had entered “formal negotiations” about whether the site could be kept going. It is understood that the decision follows an intervention by Mr Reynolds.

The Government’s offer to the company remains unclear. But ABF is demanding “short-term funding of Vivergo’s losses” as well as a longer-term deal to put its plant on a profitable footing again.Vivergo’s bosses have begun a ’consultation with employees to effect an orderly wind-down’ - Ian Davidson/Alamy

In a move that piled further pressure on ministers, the company warned: “Given the outcome of the negotiations is uncertain, Vivergo is simultaneously beginning consultation with employees to effect an orderly wind-down.”

The plant, which can produce 420,000m litres of bioethanol per year, had already stopped ordering wheat feedstock, it added.

Losing the facility would leave the UK more reliant on foreign imports and dent ambitions for domestic production of sustainable aviation fuel.

The chemicals sector is described as one of several “foundation industries” in the industrial strategy published by ministers on Monday.

A spokesman for the Government said ABF’s latest ultimatum was “disappointing to see”, while Mr Reynolds described it as “premature”.

Mr Reynolds told journalists: “We have secured a mandate across government to negotiate with them.

“That means we’re willing to engage with them and potentially put government money into a restructure to make sure they’ve got a strong future.

“We have met them many times. We’ve engaged the consultants and we’re well into the process.

“Frankly, I really do regret the Vivergo’s decision to start consultations to let the workforce go and close the plant.”

Only two plants in the UK make bioethanol, which is most commonly blended with petrol to make greener fuels such as E5 and E10.

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The vast majority of production uses primary feedstocks such as sugar crops or wheat that are processed to yield fermentable sugars that are then converted into ethanol. Because the fuel is made from plants, it is regarded as renewable.

But the Department for Transport has been accused of undermining domestic bioethanol producers by awarding green energy subsidies to American producers that make the chemical from waste, which is seen as more eco-friendly.

ABF and domestic competitor Ensus say ministers then compounded the problem by striking a trade deal with the US that grants American bioethanol producers tariff-free access to the UK market.

The trade deal has not yet taken effect but ABF says its plant in Hull is already unprofitable and cannot be sustained. It has already written £700m off its value.

Ensus, which runs the country’s only other bioethanol plant, has similarly warned that its facility in Teesside is at risk.

Previous talks between the companies and the Government had not made serious progress.

But it is understood that Mr Reynolds and Heidi Alexander, the Transport Secretary, met company bosses on Tuesday and that the Government has brought in consultants to examine ABF’s proposed rescue package.

ABF is asking for an end to the green energy certificates being awarded to American producers.

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