The UK’s largest bioethanol plant, which has said it could be weeks from stopping production following the recent US trade deal, has described the start of negotiations with the Government as a “very positive signal”.

Hull-based Vivergo Fuels said on Thursday that, given “the strategic importance of a domestic ethanol supply”, the Government has committed to formal negotiations to reach a “sustainable solution”.

But the firm, which is owned by Associated British Foods (ABF), said it is simultaneously beginning consultation with staff to wind down the plant, which employs more than 160 people, due to the uncertain situation – a process which could see production stop before September 13, if support is not provided.

An ABF spokesperson said: “We are extremely pleased to be entering the next phase of formal negotiations with Government over the future of Vivergo.

“We believe it is a very positive signal that Government recognises the strategic importance of a domestic bioethanol industry, and is serious about working with the sector to find a sustainable long-term future.

“We look forward to engaging intensively and constructively with ministers over the coming weeks.”

The statement added: “ABF cannot continue to absorb losses at the plant. That is why a timely solution is vital.

“Our clear preference is to find that solution through this process and to get back to running a business that can thrive in the long term.”

The firm said that “in parallel” it has entered into a consultation process with staff, which it said was a necessary step as there is no guarantee that the negotiations with Government will be successful.

It said: “Our employees are our most important consideration, and we will engage with them properly and transparently about the future.The Vivergo Fuels site in Hull is the UK’s largest producer of bioethanol (Vivergo Fuels/PA)

“Consultation is not a fixed outcome, and closure is not a certainty.

“The outcome depends on the progress we are able to make through negotiations with the Government.”

Last month, Vivergo wrote to the wheat farmers who supply it, telling them it will have to close unless there is quick Government intervention.

It said the removal of a 19% tariff on US ethanol imports, which formed part of the recent UK-US trade deal, was the “final blow”.

The bioethanol industry says the deal has made it impossible to compete with heavily subsidised American products.

Vivergo said the Hull plant can produce up to 420 million litres of bioethanol from wheat sourced from thousands of UK farms.

It described bioethanol production as “a key national strategic asset” which helps reduce emissions from petrol and is expected to be a key component in sustainable aircraft fuel in the future.

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The firm said it has just signed a £1.25 billion memorandum of understanding with Meld Energy to anchor a “world-class” Sustainable Aviation Fuel facility at the site.

It said the “potential ahead is enormous”, adding that “there is a real opportunity for Hull to be home to one of Britain’s most exciting clean fuel clusters”.

The plant is also the UK’s largest single production site for animal feed and the company says it indirectly supports about 4,000 jobs in the Humber and Lincolnshire region.

Following ABF’s announcement of a potential shutdown by mid-September, a Government spokesperson said on Thursday: “We recognise this is a concerning time for workers and their families and it is disappointing to see this announcement after we entered into negotiations with the company on financial support yesterday.

“We will continue to take proactive steps to address the long-standing challenges the company faces and remain committed to working closely with them throughout this period to present a plan for a way forward that protects supply chains, jobs and livelihoods.”

The Government said the bioethanol industry has been facing significant challenges for some time and officials and ministers have met with Ensus and Vivergo consistently over the last few months to address the challenges.

It said both the business and transport secretaries met representatives from the industry on June 10 and engagement with the companies “will continue at pace” to assess potential solutions, with the help of external consultants.

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