Portsmouth's banana import business loses £2.5m

City leaders have vowed to stick by a banana business despite it losing millions of pounds.

The UK's biggest banana importer has made a loss of more than 2.5m since Portsmouth City Council took it over in February last year.

This is almost double what finance chiefs anticipated when they urged councillors to buy Mainland Market Deliveries to stop it going under.

Now managers say the commercial firm, based at Portsmouth Ferry Port, won't make a profit until 2012 – two years later than initially thought.

Already almost 2m of taxpayers' cash has been set aside to cover any losses next year. But senior council figures maintain the controversial move to buy the company was still the right decision. They say the city would have been worse off if the business went bust.

Councillor Mike Hancock, in charge of planning, regeneration and economic development, said: 'It was still a good buy for the city council.

'It would have been shut if we did not take it over, and that would have meant job losses and trade losses from which it would have been impossible to recover.

'It would have finished Portsmouth as a commercial port.'

When the council got its hands on the firm's accounts, the books revealed the company lost 6m in 2007/08 – 2.5m more than previous manager Sandpiper had estimated.

And just weeks after the city council took over it lost a 1m contract with Huelin-Renouf Shipping to rivals Southampton.

But council leaders say a complete management restructure and tighter financial controls have resulted in more interest from customers.

And in June last year the firm secured a new banana shipping route to Belize.

Cllr Hancock added: 'It is disappointing the books weren't in better shape.

'It is going to take us longer than anticipated to turn it around but I am confident that we will be able to.'

City finance boss Roger Ching said although MMD would still be running at a loss in 2010, what it paid in rent and tonnage fees would mean the council made an overall profit next year.

He said although money was set aside in the council budget to cover losses, it would not be used unless the firm was close to insolvency.

WITHIN BUDGET

When Portsmouth City Council took over Mainland Market Deliveries last year it agreed to spend 2.34m on infrastructure improvements over the next five years in a bid to improve business.

Already some of the cash has been spent on a new facility for packing goods.

Other money has been spent on repairs and refurbishments, and buying four new tug boats.

So far the amount spent is within budget, although managers say they may need to spend more money on improvements in future years.

If this is the case they will have to go back to councillors for approval.

>> Vote in our latest web poll.