It has been another tough quarter for businesses in the North East as early signs of financial distress in the region grew by more than 40%.

The latest Red Flag Alert data from leading independent business rescue and recovery specialist Begbies Traynor shows that the rise took place in the second three months of the year compared with Q2 2023.

In the period from April to June 2024, another 11,329 businesses in the North East experienced instances of ‘significant’ or early-stage financial distress compared with the same period the previous year – a huge increase of 41.8%.

Andrew Little, partner for Begbies Traynor in the North East, said: “After a few really challenging years, many businesses are still reeling from the combined impact of Brexit, Covid and then the cost of living crisis, and a number are now reaching the end of the line.

"While there are cautious causes for optimism as the UK looks forward to a more stable economic environment and plans for growth, there’s real concern that any recovery may simply take too long to materialise for some SMEs.”

Partner Gillian Sayburn adds: “While the region largely appears to be holding its own and reflecting the national picture, it is still worrying to see over 11,000 businesses here experiencing early signs of financial distress in the second quarter of the year.”

Levels of this type of distress (which refers to businesses showing deterioration in key financial ratios and indicators including those measuring working capital, contingent liabilities, retained profits and net worth) also rose quarter-on-quarter, up by 10.4% in the region.

These figures are above the national average which saw a 36.9% uplift in instances of early distress across the UK compared with Q2 2023, with almost 602,000 businesses now affected. There was an 8.6% increase in UK-wide levels of significant distress quarter-on-quarter.

In terms of more advanced or ‘critical’ distress, North East businesses saw a 41.3% rise compared with the same period the previous year, however, the region experienced a small fall of 4.3% in advanced distress since Q1 2024.

This type of severe distress affected 743 businesses in the region. Across the UK, over 40,600 businesses suffered from ‘critical’ distress in the second quarter of 2024, representing a 34.5% rise since Q2 2023, and a 1.1% uplift since the previous quarter.

In the North East, 11 of the 22 sectors analysed saw double-digit increases in significant distress in the second quarter of the year compared with the previous three months. The sectors with the largest rises were: hotels and accommodation (up by 39.4%); industrial transport (up by 27.4%); media (up by 23.1%); and travel and tourism and automotive (both up by close to 20%)

The only sectors in the North East to see falls in early distress since Q1 2024 were food and beverages (down by 23.2%); utilities (down by 16.1%); print and packaging (down by 10.4%); wholesale (down by 2.1%); and food and drug retailers (down by 1%).