A QUARTER of the fresh produce industry is borrowing to finance the growth of its business and enhance market share.

A recent report by industry analyst Plimsoll Publishing reveals that 25 per cent of firms are using other people's money to drive their company forward.

The figures show a bullish attitude by the industry, with little evidence that players are tightening their belts in the face of a possible recession in the coming year.

Capturing market share is clearly the priority for many of the debtors – dubbed 'chancers' by Plimsoll chiefs.

The company says that of the 167 companies borrowing to boost growth, its analysts consider three-quarters to be a serious financial risk. Nevertheless, the figures show that in some cases taking on debt can boost business. For most fresh produce chancers it is a case of who dares wins.

They increased sales by almost twice the industry norm last year, scooping five per cent of market share. They are however carrying nearly three times the level of debt of their competitors.

Plimsoll senior analyst David Pattinson said: 'Taking other people's money and using it to generate a profit is great in the good times.' But Pattinson warned that as the culture of credit continued, the cost of the money would inevitably be passed on to the consumer.

He said: 'The dilemma for these companies is that they will need to keep charging a price premium to finance their debt.' The chancers are enjoying pre-tax profit margins of 2.1 per cent compared to an industry norm of 1.5 per cent. When interest payments are added back profitability is running at 3.4 per cent – well above the industry average.

One chancer is G's Marketing Limited, which is seeing a return to buoyant trading after a couple of difficult years.

Finance director Grant Lockhart-White explained that while the firm has taken on debt to spend its way to success, the books are ship-shape and bosses are looking forward to bountiful returns at the end of the financial year.

He said: 'We have clearly defined targets for gearing [level of borrowing against asset value] and our strategy is to borrow with those targets.

'The numbers do show that the level of borrowing has gone up, but we will make significant reductions on those after an excellent year.' Plimsoll chiefs highlighted that it is often the biggest fish in the industry which are drawn to the risk strategy – 47 per cent of the chancers have annual sales of more than £10 million.

Indeed, almost half of industry firms with sales above £10m fall into the chancer category.

Almost half of the industry's firms increased their debt last year, 54 per cent of which used the money to invest in their businesses and play for extra market share. l