The UK’s largest bioethanol plant has described a Government decision not to offer direct funding to the industry as “a flagrant act of economic self-harm” which will force it to close.

Vivergo Fuels, near Hull, warned earlier this year that it was in imminent danger of closure as crisis talks continued with the Government.

This followed the end of the 19% tariff on American bioethanol imports as part of the recent UK-US trade deal.

On Friday, the Government said: “This Government will always take decisions in the national interest.

“That’s why we negotiated a landmark deal with the US which protected hundreds of thousands of jobs in sectors like auto and aerospace.

“We have worked closely with the companies since June to understand the financial challenges they have faced over the past decade, and 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.

“We recognise this is a difficult time for the workers and their families and we will work with trade unions, local partners and the companies to support them through this process.

“We also continue to work up proposals that ensure the resilience of our CO2 supply in the long-term in consultation with the sector.”

Ben Hackett, managing director of Vivergo Fuels, said: “The Government’s failure to back Vivergo has forced us to cease operations and move to closure immediately.

“This is a flagrant act of economic self-harm that will have far-reaching consequences.

“This is a massive blow to Hull and the Humber.

“We have fought from day one to support our workers and we are truly sorry that this is not the outcome any of us wanted.

“This decision by ministers will have a huge impact on our region and the thousands of livelihoods in the supply chain that rely on Vivergo, from farmers to hauliers and engineers.”

Mr Hackett said the industry has faced “unfair regulations” for years that favoured overseas producers, and the recent US-UK trade deal pushed the sector “to the point of collapse”.

He said: “We did everything we possibly could to avoid closure, but in the end it was the Government that decided the British bioethanol sector was something that could be traded away with little regard for the impact it would have on ordinary hard-working people.

“We did not go down without a fight and I hope that the noise we generated over the past three months will make the Government think twice before it decides to sign away whole industries as part of future trade negotiations.”

A spokesman for Associated British Foods, which owns Vivergo, said: “It is deeply regrettable that the Government has chosen not to support a key national asset.

“We have been left with no choice but to announce the closure of Vivergo and we have informed our people.

“We have been fighting for months to keep this plant open.

“We initiated and led talks with Government in good faith. We presented a clear plan to restore Vivergo to profitability within two years under policy levers already aligned with the Government’s own green industrial strategy.”

The spokesman said the Government had “thrown away billions in potential growth in the Humber and a sovereign capability in clean fuels that had the chance to lead the world”.

The bioethanol industry, which also includes the Ensus plant on Teesside, has argued the trade deal, coupled with regulatory constraints, has made it impossible to compete with heavily subsidised American products.

Vivergo said the Hull plant, which employs about 160 people, can produce up to 420 million litres of bioethanol from wheat sourced from thousands of UK farms.

It has described bioethanol production as “a key national strategic asset” which helps reduce emissions from petrol and is expected to be a key component in sustainable aircraft fuel in the future.

The firm recently signed a £1.25 billion memorandum of understanding with Meld Energy to anchor a “world-class” sustainable aviation fuel facility at the site.

But Meld Energy said earlier this month uncertainly over the bioethanol industry was putting this plan in jeopardy.

The Vivergo plant is also the UK’s largest single production site for animal feed, and the company says it indirectly supports about 4,000 jobs in the Humber and Lincolnshire region.

Vivergo has said it buys more than a million tonnes of British wheat each year from more than 4,000 farms, and has purchased from 12,000 individual farms over the past decade.

But it took its last wheat shipment earlier this month.

The farmers’ union described the imminent closure of the Vivergo plant as a “huge blow”.

NFU combinable crops board chairman Jamie Burrows said: “Not only is it terrible news for those hundreds of workers who will lose their jobs but also for the thousands of people whose livelihoods depend on this supply chain – that includes local farmers who have lost a vital market for their product.”

The Ensus plant in Teesside differs from the Vivergo operation because it also produces CO2 as part of the process.

Ensus, which is owned by CropEnergies, part of the German firm Sudzucker, is the UK’s only large scale manufacturer of CO2, which is used in a wide range of sectors, including in drinks and the nuclear industry.

Grant Pearson, chairman of Ensus UK, said on Friday: “I met with Sarah Jones, the minister for business, today, to receive the Government’s response to our request for financial support and the policy changes required to ensure that the Ensus facilities can continue to operate.

“The minister confirmed that they value both our contribution to the UK economy, the jobs we provide and support in the north east of England and in particular our production of biogenic CO2 which is a product of critical national importance.

“They are therefore looking at options to secure an ongoing supply of CO2 from the Ensus facility.

“This is positive news, however it is likely to take time to agree upon and finalise and therefore 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.”