Britain Will Not Bail out Bioethanol Industry Hit by Trump Trade Deal

by James Davey (Reuters) UK-US trade deal removed UK tariffs on US ethanol; UK government says aid would not provide value for taxpayer; AB Foods confirms closure of Vivergo plant; AB Foods says UK government decision 'deeply regrettable'; Ensus talking to government to secure ongoing supply of CO2

Britain's government will not provide financial support to the struggling bioethanol industry, it said on Friday, leaving a sector hit hard by the UK's tariff deal with U.S. President Donald Trump facing imminent collapse.

The failure of the industry, which supports thousands of jobs, could prove to be an embarrassment for Prime Minister Keir Starmer, who hailed May's trade deal as a boost to businesses that would protect employment and attract investment.

It would also serve as a stark example of the global impacts of Trump's assault on world trade, with the industry's collapse set to deal a blow to production of byproducts including animal feed and carbon dioxide as well as the British farmers who supply the sector.

"We ... have taken the difficult decision not to offer direct funding as it would not provide value for the taxpayer or solve the long-term problems the industry faces," a government spokesman said on Friday.

The spokesperson said the trade deal had protected hundreds of thousands of jobs in the auto and aerospace industries.

However, under the agreement, the UK's 19% tariffs on U.S. ethanol fell to zero, through a 1.4 billion-litre (370 million gallon) quota - a figure equating to the size of the UK's entire ethanol market.

Britain has two major bioethanol plants in northern England - Associated British Foods' (ABF.L), opens new tab Vivergo plant and one operated by Ensus, owned by Germany's Sudzucker Group - which account for nearly all of its production capacity.

Both groups have said the trade deal, along with existing regulations that already gave U.S. producers an advantage in the British market, had made the environment impossible.

AB Foods, which had said in June it would shutter the Vivergo plant unless the government stepped in with an aid package, said on Friday it would start an orderly closure process immediately with production of bioethanol and animal feed ceasing by August 31.

"It is deeply regrettable that the government has chosen not to support a key national asset," a spokesperson for AB Foods said, adding that the decision threw away Britain's sovereign capability in clean fuels.

"Jobs in clean energy will now move overseas - principally to the U.S. but also to other countries with a more sensible regulatory environment," the spokesperson added.

Ensus' plant differs from Vivergo's in that it also produces carbon dioxide which is used in the soft drinks, packaged foods and nuclear industries and in hospitals. Ensus produces up to 60% of the UK's annual needs.

Grant Pearson, chairman of Ensus UK, said the government was looking at options to secure an ongoing supply of carbon dioxide from its facility.

"Urgent discussions will be taking place to provide a level of assurance to the Sudzucker and CropEnergies Boards that there is a very high level of confidence that an acceptable long term arrangement can be reached," he said. CropEnergies is another unit of Sudzucker.

Separately, the government said it was looking at increasing the amount of ethanol in UK petrol from the current 10% to assist the industry, though that will come too late for Vivergo. READ MORE