Record number of North East businesses pushed to the brink of financial collapse

The report, which has provided a snapshot of corporate health in the UK for almost two decades, shows that in the third quarter of 2024, early-stage or ‘significant’ business distress rose rapidly, affecting 11,643 businesses in the North East and 633,000 business across the UK. In the region, the number of companies with financial problems climbed by 37.3% compared with Q3 2023 and by 2.8% since the second quarter of this year. The UK saw a similar picture, with ‘significant’ distress up 5.1% quarter-on-quarter and by 32.3% year-on-year.

Early distress in the North East was partly driven by the food and drink sector which saw the highest rise since the previous quarter with a hike of 21.7%, followed by utilities (+19.2%), general retailers (+12.1%), and bars and restaurants (+9.3%).

In contrast, eight of the 22 sectors monitored in the North East by Red Flag Alert reported levels of ‘significant’ distress down on the previous quarter. These included manufacturing (-7.2%) hotels and accommodation (-6.1%), financial services (-5.6%), and sports and health clubs (-4.2%).

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.”

Looking at levels of the more advanced ‘critical’ financial distress, the North East experienced a quarter-on-quarter drop of 29.3%, representing 525 companies, close to the national figure which saw a 23.2% decrease, with 31,201 companies affected across the UK. There was also a 20.2% fall in firms suffering from advanced distress in the region compared with the same period the previous year, slightly better than the UK-wide decrease of 17.3%.

Partner Gillian Sayburn adds: “As businesses put another difficult year behind them, it is hoped that they will be able to look forward to a more positive economic environment in 2025 as the new Labour government seeks to build on its message of growth.

“However, given the high levels of debt that so many businesses have accumulated, there may well be large numbers of insolvencies still to come. As ever, any businesses that find they are struggling financially should seek advice from insolvency professionals as soon as possible before the problems escalate.”