By Cristina Gallardo and Nina Kienle

Associated British Foods said it would close a bioethanol plant in northern England unless the U.K. government stepped in to support it, citing challenges posed by the U.K.'s trade deal with the U.S.

The food-processing and retailing company said Thursday that it entered formal negotiations with the U.K. government over the future of its Vivergo bioethanol plant, which employs 160 people, in hopes of continuing to operate it on a profitable and sustainable basis.

Under the trade deal with the U.S., the U.K agreed to remove the tariff on ethanol coming into the country.

The trade deal worsened the situation at Vivergo, which was already being undermined by the way in which the U.K. government was applying regulations to imported ethanol before the agreement, AB Foods said.

The U.K. government didn't respond to a request for comment.

While formal negotiations are now under way, the outcome remains uncertain, AB Foods said.

The company said it had given the U.K. government until Wednesday to find a financial and regulatory solution during initial discussions. As the extended deadline passed, Vivergo is starting consultation with employees for a wind-down, AB Foods said. Wheat purchases ceased from June 11, it added.

"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," AB Foods said.

The company said it would cease all manufacturing before the end of its fiscal year, which runs until Sept. 13.

AB Foods generates the bulk of its earnings from its Primark retail arm, but also has big agri-food operations and it is one of the top sugar producers globally. Vivergo is part of is AB Foods' sugar division.

In April, AB Foods lowered its annual guidance of the division, due in part to losses at its U.K. bioethanol business. The group now expects to report an adjusted operating loss of up to 40 million pounds ($54.7 million) for the division in fiscal 2025, having previously anticipated an operating profit in a range of 50 million pounds and 75 million pounds.

Write to Cristina Gallardo at cristina.gallardo@wsj.com and Nina Kienle at nina.kienle@wsj.com

(END) Dow Jones Newswires

June 26, 2025 08:11 ET (12:11 GMT)

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