R3 report: North East rides out tough economic conditions in 2025 with fall in insolvency activity
North East businesses managed to ride out a tough economic picture throughout 2025, with the region registering an annual decrease in insolvency-related activity and an increase in new start-ups, according to a new report from R3, the trade body for restructuring, turnaround and insolvency professionals.
The 2025 figures for the region show a 9.3% decrease in insolvency-related activity, which includes administrations and creditors’ meetings as well as voluntary and compulsory liquidations from 863 cases in 2024 to 783 last year.
However, levels of insolvency activity still remain much higher than five years ago.
There was a 3.3% increase over the same period in the number of start-up businesses which rose from 16,897 to 17,455.
The R3 Annual Business Health Report, compiled using data from Creditsafe, also looks at sector trends across the UK, with the national picture indicating a fragile operating environment for many local businesses.
Construction continued to account for the highest number of insolvency activities in the UK in 2025 (4,584 cases), despite a modest reduction of 6% on the previous year.
The sector was exposed to rising material costs, delayed payments, skills shortages and weak investor confidence.
Wholesale and retail (4,124 cases) and accommodation and food services (3,831 cases) also saw elevated insolvency activity numbers, reflecting pressure on margins as households reined in discretionary spending and businesses struggled to absorb or pass on higher costs.
Manufacturing insolvencies remained historically high with 2,188 cases, as companies contended with energy costs, supply chain disruption and subdued export demand.
Kelly Jordan, North East Chair of R3, and partner at Muckle LLP, said: “The R3 report shows that businesses, both regionally and nationally, struggled to regain their footing in 2025 after several years of economic challenges.
“While inflation has now eased, the cumulative impact of higher costs, tighter credit conditions and weak demand continues to place significant pressure on local companies, particularly smaller and mid-sized firms with limited financial headroom.
“As we move into 2026, while cashflow and profit margins remain under pressure, seeking professional advice at an early stage from an R3 member can make a critical difference, giving viable businesses the best chance of survival and recovery.”