(Reuters) -Associated British Foods ( ASBFF ) said it would close the UK's largest bioethanol plant by September if the government does not provide support and funding, potentially the first victim of Britain's tariff deal with U.S. President Donald Trump.

Under last month's trade deal, the UK's 19% tariffs on U.S. ethanol will fall to zero, through a 1.4 billion-litre (370 million gallon) quota - a figure equating to the size of the UK's entire ethanol market.

The possible closure would be an embarrassment for Prime Minister Keir Starmer who hailed the trade deal as a boost to businesses that would protect jobs and attract investment.

It also underscores how Trump's assault on trade is being felt around the world, with the closure set to affect the production of byproducts including animal feed and carbon dioxide, and British arable farmers which supply the industry.

Bioethanol is produced from crops such as wheat and is used to make petrol greener and to make sustainable aviation fuel. On Monday, Starmer's government launched its industrial strategy, promising to invest in the green economy.

Britain has two major bioethanol plants in northern England - AB Foods' Vivergo plant and one operated by Ensus, owned by Germany's Sudzucker Group - which account for nearly all of the UK's production capacity.

They have warned that the trade deal, along with existing regulations that give U.S. producers an advantage in the British market, has made the environment impossible. The industry supports thousands of jobs.

Ensus, which has warned its Teesside plant also faces imminent closure, on Thursday welcomed the appointment of external advisers to work with the industry, and said it would work with the government "urgently".

LEVEL THE REGULATORY PLAYING FIELD

AB Foods said on Thursday it would begin consultations with employees for an orderly wind-down of its plant, while simultaneously continuing talks with the government, which it said is now committed to reaching "a sustainable solution".

It said it would cease all manufacturing before September 13, its financial year-end, "unless the government is able to provide both short-term funding of Vivergo's losses and a longer-term solution."

A spokesperson for the government said it was disappointed with AB Foods' announcement, having entered into negotiations with the company on financial support on Wednesday.

The government would "present a plan for a way forward that protects supply chains, jobs and livelihoods," the spokesperson added.

AB Foods wants the government to increase the amount of ethanol in UK petrol from 10% to 15% and support the development of sustainable aviation fuel.

It also wants the industry to have access to short-term financial aid of up to 150 million pounds ($202 million).

Britain's concession on ethanol was made in return for the removal of 25% additional tariffs on steel and aluminium, and a quota of 100,000 cars at a duty of 10%.