ABF confirms plans to shut bioethanol plant despite last-minute government negotiations
Associated British Foods has confirmed plans to shut its Yorkshire bioethanol plant despite the government entering formal negotiations to rescue the site, in a blow to Labour’s new industrial strategy.
The food producer, which also owns the retail giant Primark, said it had now begun consultation with employees to effect an orderly wind-down, with purchases of wheat, used for the manufacturing process, having ceased from 11 June.
That comes after the firm’s deadline of Wednesday for the government to offer a rescue package passed, with hundreds of jobs now at risk.
“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,” ABF said, adding that it would cease all manufacturing before the end of its financial year on 13 September.
But the company also said the government had now “committed to formal negotiations to reach a sustainable solution.”
ABF said the precarious financial position of the plant, one of only two of its kind in the UK, had been “made significantly worse” by the UK’s trade deal with the US, which will allow tariff-free US ethanol into the UK, eating into its competitiveness.
“ABF has engaged in extensive discussions with the government to find a financial and regulatory solution that would enable Vivergo to operate on a profitable and sustainable basis.”
In April, ABF CEO George Weston told City PM the plant had been hamstrung by the government’s decision to double-count renewable fuel certificates for overseas producers, which “gives them an unbeatable cost advantage.”
“We don’t believe that the government’s been obliged to do that, they’ve chosen to, and they’ve put this business in an impossible position by the action they’ve taken,” he said.
“We really are doing everything we can to save that plant, we don’t want to mothball or shut it but we may be forced to.”
Problems at the Yorkshire plant, as well as a general downturn in sugar prices, helped push ABF’s sugar division to a loss of £122m for the six months to March, down from a profit of £121m the previous year.
Another industrial strategy blow
The plant is the second in as many days to announce closure plans after Sabic’s chemicals plant on Teesside unveiled plans to close on Wednesday, putting over 100 jobs at risk, in an embarrassing blow to the government’s new industrial strategy plans, which were published on Monday.
Tees Valley mayor Ben Houchen said: “We urgently need a proper response from government, starting with a targeted support package for affected workers and families, and a clear plan for how we retain and grow industrial jobs in areas like Teesside.
“This is yet another symptom of a national policy failure. The chemicals sector is a foundation industry – the lifeblood of our economy in the North East – yet it didn’t even feature in the Government’s Industrial Strategy this week. It is beyond indefensible.”
Business Secretary Jonathan Reynolds said: “We’re willing to engage with them and potentially put government money into a maybe structure to make sure they’ve got a strong future.
“We have consultants engaged to do the next stage of this. So I do regret any action that prevents that, because we recognize the impact.”