The latest report into the UK fresh produce market from industry analyst Plimsoll finds that almost 15 per cent of its businesses are in financial danger.

Plimsoll rates 149 of the UK’s leading 1,000 fresh produce companies in its danger category and suggests that, in the long run, some business failures will be better for the sector as a whole.

Amid calls for bail-outs and emergency measures, senior analyst David Pattison asked: “Should we just let them fail? There is no doubt in my mind that recessions catch bad businesses out. Those companies that have entered this period ill-prepared have placed themselves at a distinct disadvantage. Many have grown used to running their businesses on high-risk business models, propped up largely on finance.”

Some sectors appear to be more at risk than others and while ready-meal and sandwich makers have been hard-hit by the ongoing recession, so too are those produce companies that supply them. Also at risk are organics firms and growers with high capital investment and exposure to a single major supermarket client.

Of the 149 firms Plimsoll rated as in danger, the report shows that 63 increased their debts last year, carrying almost twice the level of debt recommended by the analyst. Using debt has become a means of propping up their businesses, Pattison warned - and for many this started to become an issue as long as three years ago. Of the firms, 118 saw profits fall last year and 95 are losing money. Their costs are ahead of sales and they have failed to respond to changes in their business structure.

Pattison said: “It is clear that many of these 149 danger-rated businesses are fundamentally poor, aggressive or disruptive and are unhelpful to the market. With newly prudent banking systems in place, raising quick finance will not paper over the cracks as it once did.”

Plimsoll’s report reveals that the fresh produce sector has overcapacity and 31 per cent of businesses suffered a fall in sales last year - many by up to nine per cent.

The reality is that for many of these 149 danger businesses, their problems go back years - certainly long before the current UK slowdown - yet they have failed to fix their problems.

Pattison said: “Not all of these 149 businesses will survive. Get your cash in quickly, avoid large exposure to one client, take precautions against bad debts and measure your profitability on a weekly basis to see if costs are running ahead of sales. If they are, think seriously how you can address the problem now, not in three months.”

The winners in the scenario will be those companies who entered the period already in good shape and are in a position to adjust their businesses to the market, making strategic decisions quickly. They are also likely to acquire weakened competitors and, with business failures in the marketplace, take advantage of increasing market share through newly freed-up capacity and even raising their prices.