There are now 61 companies in the UK fresh produce industry that are “zombie” businesses who have seen their performance deteriorate to such as extent that they now exist merely to pay off their debts and survive, according to new analysis.

According to the report from Plimsoll, there are “zombie” businesses with debts at an average of 49 per cent of turnover - they exist to service their out of control liabilities. The assessment of 988 companies also states that there are many are also using their suppliers to finance their growing losses, taking twice as long as to pay their bills as the industry average of 38 days.

David Pattison, the report’s author, said: “These companies are in a state, posting growing losses and, despite the obvious freeze in the credit markets, increasing their debts.

“They are falling behind the rest and their productivity is well below the industry average. It’s hard for them to compete as their cost base is just too high. As a result, investment plans have been mothballed meaning their aging assets are further restricting their ability to remain competitive”.

Pattison is clear that not all will survive and those that do face extremely tough times. “The first thing they need to do is sort out their immediate finances. They have to convince their banks and suppliers to keep supporting them or not pull the plug. If they can pull that off then the hard work really starts. They urgently need to stem their losses and control costs. The longer it takes them to address these issues, the harder and less likely it is they will ever fix them,” he said.

Pattison said there are a number of “canny investors” and claims there are 38 companies with potential to be taken over.

He added: “Most have simply had their day and a combination of aging assets, rising losses and increasing debts mean they are unlikely to attract a suitor before the receivers are called. They will be forced back into negotiations with their lenders to buy more time but their future doesn’t look good”.

Topics