More than 45,000 companies in the North West are facing "significant financial distress", according to Begbies Traynor.
New research from the Manchester-headquartered insolvency group shows that 45,579 businesses in the region are in trouble as inflation and interest rates bite.
The second quarter results are a year-on-year increase of 8.01% (up from 42,198) and a quarterly jump of 3.47% (up from 44,052).
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Begbies Traynor said the latest data is sourced from a "completely new Red Flag dataset" that has involved a "deep dive analysis" of eight years' company data by data scientists over the past two years to track key factors behind company distress and failure rates.
"Significant distress" refers to businesses showing deterioration in key financial ratios and indicators including those measuring working capital, contingent liabilities, retained profits and net worth.
The largest volume of distressed businesses are found in a trio of key economic sector hubs in the North West region: construction, real estate and support services which, together, make up 41% of the total (18,838) number of significantly distressed firms.
Discretionary spend sectors have been hit hard over the past 12 months. sports and health clubs has seen a 22% year on year increase in significant distress, leisure and cultural has seen a 11% (11.14%) increase and food and beverage a 20% increase (19.84%).
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The number of firms in the bars and restaurants sector in distress has increased by 10% (10.13%) and there are now 1,305 local companies, many family-owned, struggling to survive.
Gary Lee, partner at Begbies Traynor, said: "Rising interests rates coupled with a stubborn inflationary environment are the core drivers behind the increase in the number of companies in the North West operating on the brink.
"We regularly see company directors who have a business loaded with debt that looks more vulnerable every single month as the Bank of England increases rates. The era of 'cheap money' is over and smart company directors are already restructuring or refinancing their operations to survive.
"Construction and property are major bellwethers for the health of our regional economy and the sheer volume of firms in distress will have creditors in their supply chains looking nervously at their own financial exposure.
"The fact that property is intrinsically linked to interest rate fluctuations and debt funding means these companies have been cruelly hammered by rising rates and the inflation that has been building up over the past 18 months.
"Almost all consumers are cutting back on discretionary spend so it’s no surprise to see some of our favourite restaurants, bars, sporting and cultural activities taking a hit.
"These types of companies will only see conditions worsen as more people face paying more each month for their mortgage. They’ll have to offer something really special to entice people to spend as we head into the second half of 2023 or they face extinction."