A study has found 29 per cent of the UK's top 520 forklift companies are selling at a loss and nearly 60 per cent have falling margins.

David Pattison, senior analyst on the Plimsoll Publishing Ltd study, said companies were forced to "up the ante" as they got desperate to win sales or retain customers.

"By reducing prices, extending special sales terms or putting more value into their services, many must take a hit on their margins," Pattison said. "You could argue that is because the customer has so much choice."

Statistics from the analysis showed 15 per cent of the UK's top 520 forklift companies were losing money for the second year; 59 per cent of companies' margins had fallen; and 38 per cent had maintained sales with reduced margins. The average margin in the industry was 2.6 per cent, was down from 2.9 per cent last year, and 3.3 per cent was the average return on investment.

"It can take three to five years for a company to fail. Large corporations can take years. Low industry margins and loss making will often lead to increasing debts especially if a company is expanding and taking on extra costs. Interest payments then reduce margins.

"These companies are then forced into extra sales incentives to maximise capacity. High levels of debt and low margins are a recipe for disaster," Pattison said.

The study, available for sale, separates the "112 weakening companies whose strategies must change, from the 179 companies who are so fundamentally strong that any downturn in profitability is merely an inconvenience". For more information, go to www.plimsoll.co.uk.