But there was a steep rise in number of regional firms experiencing the most serious financial difficulties
The rate at which distress levels in North East businesses is growing has slowed slightly, according to new research.
Data included in a quarterly snapshot of the region’s corporate health shows the number of North East firms experiencing significant and early stage distress reached 13,676 in Q4 of 2025, up 7.9% on the quarter before and 11.5% on the same period the year before. 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%.
The latest Red Flag Alert research from Begbies Traynor showed a more marked slowdown nationally. UK businesses saw a rise of 0.3% in early-stage distress since the previous quarter, and a year-on-year increase of 11.3%, with 728,640 firms affected in total.
In the North East, a number of sectors monitored in the research showed a fall in levels of significant distress levels between Q3 and Q4. Bars and restaurants saw a 2.9% reduction with 535 businesses affected, while the travel and tourism sector saw an 8.6% fall with 74 businesses affected, and industrial transport and logistics registered a 6.4% reduction with 235 businesses affected.
The sharpest increases in distress levels, quarter-on-quarter, were seen in the print and packaging sector – which experienced a 73.3% increase with 52 firms affected – in food and drink production, which saw a 32.2% increase with 123 businesses impacted, and hotels and accommodation, which registered a 27.9% increase with 156 businesses affected.
Meanwhile, the most serious financial problems were also on the rise across the region, with 1,280 North East firms experiencing advanced or critical distress. That level was up 27% on Q3 and more than 39% 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.”


