The potential collapse of the UK's bio-ethanol sector is the result of a "Whitehall farce", according to Shore Capital analyst Clive Black, who issued a sharp rebuke to the government over recent policy moves that could lead to the closure of the country’s two key production plants.
This raises concerns not just for fuel production, said Black, but also for the supply of CO₂ and high-protein animal feed, both byproducts of bioethanol processing.
Black highlighted that around 1-1.4 million tonnes of British feed wheat are used annually by the bioethanol sector, nearly 15% of the UK’s total production.
His comments follow the UK’s decision to allow 1.4 billion litres of tariff-free US ethanol imports as part of a trade deal with Washington.
This move, said Black, head of research and the Liverpool-and-London broker and former head of food policy at the NFU, has blindsided the local industry.
Prior to the trade agreement, US ethanol was subject to tariffs of nearly 20%.
The result, Black argues, is a potentially existential threat to the sector, compounded by “regulatory obstacles” and a lack of policy clarity.
"The UK bioethanol industry seeks clarity from dysfunctional British government departments before it implodes," he said.
Last month, Associated British Foods PLC (LSE:ABF) warned that its Vivergo plant in Saltend was at risk of closure due to government policy even before the US deal.
The FTSE 100 company said the commercial viability of the business was being "undermined" by the way that regulations are being applied to bioethanol.
Ben Hackett of Vivergo, a division of Associated British Foods, recently stated: "The removal of tariffs on US ethanol, combined with ongoing regulatory obstacles, has left us unable to compete on a level playing field."
Another facility in Teesside run by Ensus is also understood to be at risk.
"The serious potential of the closure of the bioethanol outlets has quite serious implications... for a market where feed wheat prices have been depressed for much of the 2024–25 season," said Black.
He added that while ABF has absorbed the financial impact, regional farmers are less insulated. "Farmers in the northeast of England are not so well resourced or financially blessed,” he said.
Calling for a structural overhaul, Black said DEFRA was "feckless and useless" and the UK needs a minister who "truly protects British society and its food system".
The UK government has said it is “working closely” with the sector to assess possible support, according to an FT report.