The number of businesses in the North East experiencing ‘critical’ financial distress rose by almost 10% compared to the same period a year ago, according to the latest Red Flag Alert research from financial and real estate advisory group BTG.

The Red Flag Alert data, published this week, showed that a total of 970 companies in the North East were in critical financial distress as of 30 June 2026. Nationally, critical distress rose by 9%.

Levels of less serious ‘significant’ or early-stage financial distress were up by 2.5% on the same period in 2025, with 12,000 businesses affected in the region, against a national year-on-year rise of 1.1%.

The sector picture across the North East was mixed. Six of the 22 sectors saw a year-on-year reduction in significant financial distress with the largest annual decreases recorded in financial services (-24.2%), manufacturing (-12.4%), food and beverages (-3.3%) and bars and restaurants (-3.2%).

The sectors recording the largest year-on-year increases in significant financial distress were printing and packaging (+75.0%), sport and health clubs (+20.4%), media (+15.4%), automotive (+14.9%) and leisure and cultural activities (+10.2%).

Andrew Little, partner at BTG in the North East, said: “The year-on-year increase in critical distress shows that many businesses are still facing considerable financial pressure and the impact of higher operating costs, energy and fuel prices and subdued demand continues to be felt across the economy.”

BTG partner Gillian Sayburn added: “It seems that many businesses may be holding their breath before making major decisions on investment and expansion, as they wait for greater clarity on the direction of the economy and the impact of Andy Burnham’s tenure as Prime Minister.

“While that cautious approach can help preserve cash and provide some short-term resilience, it can also mean that businesses delay decisions that could support future growth and they should be wary of allowing caution to become inaction.

“Those that continue to monitor their cashflow and financial position closely, review their cost base and seek advice early when challenges emerge will be best placed to navigate the uncertainty ahead.

“Early advice can make a substantial difference in helping businesses identify their options and avoid a situation becoming critical.”

BTG Red Flag Alert has monitored early and critical financial distress levels among UK businesses for over 20 years, using a range of legal, financial and trading indicators.