Company administrations across the North East are on track to surpass last year's high levels as businesses grapple with a range of headwinds.
Separate research from two insolvency specialists points to evidence of fragility in the region's economy as levels of distress rose sharply in the third quarter of this year. A study from Interpath Advisory shows the number of companies in the North East filing for administration during the first nine months of the year has outpaced last year’s figures by 25%.
Researchers found 50 administrations across the region in the first nine months of the year, driven predominantly by industrial building, construction and industrial manufacturing firms. The analysis also revealed the North East showed the fastest proportional rise in administration cases in the year to date - a finding that was supported by third quarter research from Begbies Traynor showing the number of North East companies with financial problems shot up by 37.3% compared with the same quarter of 2023, and by 2.8% since the second quarter of this year.
More than 11,600 businesses in the region were found to be in early stage of significant business distress with the research identifying the food and drink sector as suffering the highest rise in distress on the previous quarter, with an increase of 21.7% followed by utilities (+19.2%), retailers (+12.1%), and bars and restaurants (+9.3%).
James Lumb, managing director and head of the North East team at Interpath Advisory, said: "The North East is very likely to is on track to surpass last year’s rate of administrations. Despite some improving economic metrics, these figures lay bare the fragility that persists in the economy and challenges that still face business leaders in maintaining solvency, let alone consider growth opportunities.
"The picture on the ground here in the North East is particularly pressing having recorded the largest jump in cases of any º£½ÇÊÓƵ region. Looking at the figures nationally, there’s a stubborn volume of administrations across the country and a clear profile of the type of businesses in distress taking shape.
"Construction and manufacturing feature prominently in the national figures, like they do locally here. Those in the construction sector have really suffered so far this year as they navigate the impact of such a sustained period of price inflation and square that with the prevalence of fixed price contracts across the sector. There are also specific challenges in the sector like possible liability under the Building Safety Act.
"Looking ahead, we expect administrations to push further beyond last year’s figures come December as some businesses struggle to respond to market conditions, but also as others find the pressure of growth too much to bear. Whatever position they are in, business leaders will be looking to the Budget at the end of this month and the Bank of England’s approach to expected interest rate cuts for some stability and visibility so they can make better, more informed decisions to guide their organisations through this fragile economic period."
Andrew Little, partner for Begbies Traynor in the North East, said: “The latest data highlights how economic uncertainty is impacting businesses across the economy, pushing another 3,163 companies in the North East into financial distress since the third quarter of last year. With the majority of sectors impacted, it seems that few are immune from the tsunami of adverse conditions from which businesses have suffered in recent years, battling a host of challenges from Brexit and a pandemic to persistent inflation and falling consumer confidence."
