Critical business distress among North East companies fell by 21% over the past year, even as more than 12,000 firms in the region reported financial struggles last month. The latest Red Flag Alert research from financial and real estate advisory group BTG shows the North East is bucking national trends, with the number of businesses experiencing significant financial distress at the end of September dropping by 0.9% year-on-year to 12,563.
Regional decline contrasts with national rise
This compares with a 1.6% increase nationally, which brought the UK total to 738,144 businesses. Meanwhile, the number facing more severe, critical distress has dropped by 21%, according to the latest figures.
The research also suggests a considerable slowdown in the growth of significant distress in the region. The year-on-year increase was 8.9% in Q3 2025 and 37.3% in Q3 2024, compared with a 0.9% decrease in the third quarter of this year.
Sector variations across the region
However, different sectors are suffering more than others. Fourteen of the 22 sectors monitored in the region posted a fall in significant distress year-on-year. The largest decreases were in manufacturing (-32.0%), financial services (-30.7%), utilities (-23.8%) and telecommunications and information technology (-12.7%).
Yet eight sectors in the region saw an increase, including media (+23.3%), printing and packaging (+16.7%), sport and health clubs (+11.9%) and food and drug retailers (+9.7%). Construction, often seen as a bellwether for the wider economy, recorded a 7.0% increase in significant distress, affecting around 2,300 businesses in the North East.
Experts urge caution despite positive signs
Andrew Little, partner at BTG in the North East, said: “The latest figures suggest that financial distress across the North East may be stabilising, with a small fall in significant distress coming in the wake of sharp rises recorded over the previous two years. The 21% drop in more serious critical distress is also welcome.
“However, the overall picture remains mixed, with some sectors continuing to face considerable pressure. A rise in construction distress is always worth watching, as the sector can reflect wider changes in business confidence, investment and borrowing costs.”
BTG partner Gillian Sayburn added: “Businesses are still having to manage high operating costs and uncertainty, and it’s worth saying that a slowdown in distress does not necessarily mean pressures have disappeared. Companies need to remain alert to changes in cashflow and margins, particularly if demand remains subdued.
“Those experiencing difficulties should seek advice early. Taking action before problems become critical can give businesses more options to manage their finances and protect their future.”
