Business distress in the North East is showing signs of slowing despite seeing another rise in the number of firms tackling financial struggles, new data suggests.
Almost 12,700 businesses in the region experienced early or ‘significant’ financial distress in the third quarter of the year, an increase of 8.3% on the previous quarter and 8.9% on the same time in 2024, according to the latest Red Flag Alert research from business rescue and recovery specialist Begbies Traynor.
The Red Flag Alert – which provides a quarterly snapshot of the Ƶ’s corporate health – suggests that while the tide of early business distress is continuing to rise, the new figures mark a slowing of the rate at which the number of firms in financial difficulty is growing, with levels in the North East slightly lower than those across the Ƶ as a whole.
In the North East, levels of advanced or ‘critical’ distress in the latest quarter rose by 92% year-on-year, and by 13.9% since Q2 2025, with over 1,000 businesses in the region now categorised as being in advanced distress. The figure was higher than those seen across the Ƶ which saw a 78% uplift in critical distress since Q3 2024, and a rise of 12.6% quarter-on-quarter, affecting more than 55,500 businesses.
Andrew Little, partner for Begbies Traynor in the North East, said: “While it is encouraging to see some slowdown in levels of early distress affecting businesses in the region and across the Ƶ, there’s no doubt that conditions remain challenging.
“Despite a very slight growth in GDP in August, and encouraging retail sales as well as lower than expected inflation, the economy has been struggling to gather momentum.
“As the problem of stagnating real wages impacts consumers and, in turn, consumer spending for businesses, concern needs to be addressed with stability and certainty to plot a path forward.”
Gillian Sayburn, partner at Begbies Traynor, added: “While it is concerning to see business distress rising across so many sectors, the North East appears to be fairly resilient with levels of early distress here slightly below those across the Ƶ as a whole.
“Unfortunately, inflation is remaining stubborn and given ongoing uncertainties with global trade, we expect conditions to remain challenging. Our message to business owners is simple – if the warning signs are there, act early when there are more options available to restructure or recover a business rather than waiting for a crisis point to be reached.”
The latest survey showed that across the Ƶ there was a 9% increase in significant distress compared with the second quarter of the year, and a 14.8% rise year-on-year, resulting in almost 726,600 businesses now in this early distress. In terms of significant distress, in the North East, all of the 22 industry categories monitored by Red Flag Alert saw increases from the second to the third quarter.
The worst affected categories were travel and tourism with a hike of 76.1% (81 businesses affected); followed by utilities which rose by 37% (63 businesses affected); logistics (251 businesses), automotive (391 businesses), financial services (316 businesses), and leisure and cultural (366 businesses), all of which were increases of more than 20%.
