PRODUCTION at one of Europe's largest biofuel plants is to be halted for up to four months.

Ensus said the move at its £250m plant at Wilton, Teesside, which only opened in February last year, was a temporary measure because of adverse market conditions.

All 100 directly employed workers will be retained on full pay when the plant, producing bioethanol which is added to petrol, ceases production at the end of May for between two to four months.

The firm blamed lower than anticipated demand for its ethanol across Europe as a result of a delay in European Union member states implementing the Renewable Energy Directive.

The directive, which came into force in December, will phase in targets that mean that by the end of the decade 20per cent of all energy used in the EU, including fuel, has to come from renewable sources.

In addition, the European market is still flooded with cheap imported ethanol from the United States, which takes advantage of loopholes in EU import legislation to avoid tariffs.

As a result demand for the Ensus product, made from animal feed grade wheat, has not risen in line with its raw material costs.

The company said it fully expected the market to improve in the coming months as implementation of EU legislation caught up.

Ensus chief executive Peter Sopp said: "Obviously we can understand that people are concerned but we really do see it as a temporary issue as the market develops.

"We still have a very good business and coming off in poor market conditions is about protecting the future for the business."

Mr Sopp said it could be potentially more damaging to keep the plant open in the current conditions.

He added: "Obviously we haven't taken the decision lightly because it has an impact in the broader supply chain."

An estimated 2,000 to 3,000 workers are employed in the plant's supply chain, including farmers and hauliers, although only around 40 sub contractors are employed directly at the plant at any given time.

Mr Sopp added: "We are including a lot of agricultural jobs because we obviously take in wheat as our main source so the impact on agricultural jobs over the next few months will be minimal.

"The impact is more on the suppliers who come and supply services and products to the plant."

The plant, Europe's biggest wheat biorefinery, produces three core products ethanol, high protein animal feed and carbon dioxide, which is liquified for use in products such as fizzy drinks.

Despite the firm's insistence that the move is a temporary measure it is the latest high profile biofuel business on Teesside to suffer a setback in recent years.

Since 2008 biofuels producers D1 Oils and Biofuels Corporation have both closed refineries on Teesside.