Over two-fifths of North East firms at heightened risk of insolvency, data shows

The number of companies in the North East rose this summer – but so did the proportion of those with a raised risk of insolvency.

Research from business recovery association R3 found there were 82,704 active firms in the region at the end of Q3, compared with 81,331 at the start of the period.

But the net rise of 1.7% (or 1,373 businesses) between June and August came alongside an increased risk of financial woes.

The proportion of North East firms with a higher-than-normal risk of entering insolvency over the next 12 months rose from 40% to 42% across the third quarter. It has risen consistently from 35% since the start of 2018.

The region’s pub and restaurant sectors have the lowest proportion of companies at a higher-than-normal insolvency risk of any part of the UK. Similarly, the North East’s hotel and agriculture sectors are the second lowest nationally.

But the professional services and retail sectors in the region are struggling compared to rivals in other UK regions. Both sit two from the top in terms of proportion of firms at risk.

R3’s North East chair Andrew Haslam, head of business advisory firm FRP Advisory LLP in Newcastle, said: “Despite any number of commercial and political uncertainties, the North East’s entrepreneurial spirit is continuing to drive the number of active businesses in the region upwards, even when the relentless rise of the regional insolvency risk indicates that we will also have sadly lost many firms over the summer.

“The warm summer weather, England’s World Cup success and the various events that made up the Great Exhibition of the North will all have helped to get people out and about, and our leisure sector businesses have clearly reaped the rewards of this.”

He continued: “However, there isn’t a great deal of evidence that these crowds were spending as much with our regional retailers as they would have liked, and as we enter what should be the most profitable part of the year for the sector, store owners will doubtless be hoping that we all start our Christmas shopping sooner rather than later.”

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