The number of North East businesses experiencing ‘significant’ or early-stage financial distress reached 13,676 in Q4 2025, up 7.9% on the previous quarter and 11.5% on the same period in 2024, according to the latest Red Flag Alert research from financial and real estate advisory group Begbies Traynor.

The data, part of a quarterly update on the UK’s corporate health, reveals a slight slowdown in the rate at which business distress is increasing in the North East and shows a more marked slowdown nationally. Between Q2 and Q3 2025, the number of North East companies in financial difficulty rose by 8.2%, but in Q4 the rate had slowed slightly to 7.9%.

Nationally, UK businesses experienced a rise of just 0.3% in early-stage distress since the previous quarter, and a year-on-year increase of 11.3%, with a total 728,640 firms affected.

In the North East, four out of the 22 industry sectors monitored recorded a reduction in levels of significant distress in Q4 2025 compared with Q3. They included bars and restaurants (-2.9%, 535 businesses affected), industrial transport and logistics (-6.4%, 235 businesses affected) and travel and tourism (-8.6%, 74 businesses affected).

Conversely, several sectors saw distress levels climb quarter on quarter. The sharpest increases were in printing and packaging (+73.3%, 52 businesses affected), food and drink production (+32.3%, 123 businesses) and hotels and accommodation (+27.9%, 156 businesses).

More serious financial problems are also rising. 1,280 North East businesses were experiencing advanced or ‘critical’ distress in Q4, up 27% on Q3 and 39.1% on Q4 2024.

Andrew Little, partner for Begbies Traynor in the North East, said: “We may be seeing a slight plateauing in early-stage distress as the rate of increase slows. This comes as some positive economic indicators begin to filter through. November’s small uptick in GDP, for example, hints at a wider cooling of inflationary pressure and a potential gradual improvement in trading conditions.

“However the steeper rise in more advanced distress tells a different story: this is where financial problems have already become more acute and, without intervention, could lead to insolvency”.

“It is also worrying that the region’s food and drink producers had an unexpectedly challenging three months in a quarter that, in the run up to Christmas, is normally strong, with increased festive demand and production at capacity.”

Begbies Traynor partner Gillian Sayburn added: “While the pace at which distress is increasing may be slowing, businesses across the North East are still grappling with weaker consumer spending, elevated costs and higher borrowing rates. For any firm worried about escalating financial strain, accessing advice early can make a real difference to the range of options available.”

Begbies Traynor’s Red Flag Alert has monitored early and critical distress levels among UK businesses for nearly 20 years, using a range of legal, financial and trading indicators.