The country's largest producer of bioethanol has suspended production and blamed the Government, raising fears for its future and causing uncertainty for farmers.

Vivergo Fuels, bought from BP two years ago by British Sugar parent firm Associated British Foods, said a collapse in profit margins meant it had taken its £350m plant in Hull offline for the "foreseeable future".

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Its statement offered no guarantees to the company's 150 staff on their employment prospects.

Vivergo, one of the Government's Northern Powerhouse Partners, said the market "remained constrained by inaction" in the UK on the EU-led E10 initiative - making fuel producers use 10% bioethanol in petrol by 2020 to cut carbon emissions.

Unleaded petrol currently contains about 5% bioethanol - a renewable fuel made from feed wheat.

The facility is also the country’s largest single production site for animal feed, delivering 500,000t of high-protein feed to more than 800 UK farms.

Vivergo argues that by not implementing E10 fuel, the Government is not only failing to cut emissions, it is also failing its industry and the 3,000 jobs it supports in the supply chain - mainly farmers.

Its statement said: "While the plant is offline, we are taking the opportunity to bring forward and extend our annual plant maintenance work in order to maintain employment levels.

"We will closely monitor the market ahead of any plant re-starting.

"In the meantime, we will continue to work with all stakeholders and the Government to support the legislative process and the future roll-out of E10; the simplest, most readily available environmentally friendly option for consumers to help reduce the impact of road transport on our environment and providing stability and confidence in the future of the UK bioethanol industry and the jobs it supports."

NFU crops board chairman Mike Hambly said: “We are concerned that the Vivergo plant is shutting down for the foreseeable future. As the largest single intake for feed wheat in the country it is a valued customer for farmers, especially in the north east where the plant is based.

“During this uncertain time for farmers producing crops for biofuels, we’re calling on the Department for Transport to implement its proposals to raise the Renewable Transport Fuels Obligation and to introduce E10 to the UK fuel mix. This legislative action would give industry the confidence it needs.”

Farmer impact

“Farmers supplying wheat into the Vivergo plant may have to find somewhere else to sell their product, and that’s likely to be at a lower price. Alternatively farmers will have to store wheat for longer – which they may not have space for. 

“Losing the animal feed that is produced as a co-product of bioethanol production means that any livestock or dairy farmers that are supplied by Vivergo’s animal feed merchants will have to source alternative proteins. This comes at a time of year when animal feed demand is at its highest.”