The North East of England has long faced unique economic challenges, and the latest insolvency statistics paint a concerning picture for local businesses and individuals. As a Newcastle-based insolvency practice, we see firsthand how regional factors combine with national pressures to create particular difficulties for North East businesses.
Understanding these regional trends isn’t just about statistics—it’s about recognising the warning signs affecting your business and knowing when to seek help.
The North East’s Persistent Challenge
The North East has had the highest individual insolvency rate in England and Wales every year since 2008, with the region recording 33.4 insolvencies per 10,000 adults in 2024—one in every 300 adults. This is significantly higher than the national average and more than double London’s rate.
But it’s not just personal insolvencies causing concern. In Q3 2024, the number of North East businesses experiencing early financial distress reached record levels, rising by 37.3% compared with the same period in 2023, affecting 11,643 businesses across the region.
These aren’t just numbers—they represent real businesses, real jobs, and real families across our region.
Why Is the North East Particularly Vulnerable?
Several factors combine to make the North East more susceptible to financial distress than other regions:
Economic Structure
The North East economy has historically relied on manufacturing, heavy industry, and traditional sectors that have faced significant challenges over recent decades. While there’s been progress in diversification, the region’s continued reliance on labour-intensive sectors like hospitality, retail, and manufacturing makes it particularly vulnerable to rising costs.
These sectors operate on thin margins at the best of times. When costs rise—whether energy, wages, or materials—there’s little room to absorb the increases without passing them to customers, which in turn can reduce demand.
Lower Wage Economy
The North East has traditionally had lower average wages than much of the UK. While this reduces some business costs, it also means:
- Consumer spending power is more limited, affecting retail and hospitality businesses
- Personal debt problems escalate more quickly when costs rise
- Businesses have less of a financial cushion to weather difficult periods
- Directors may have fewer personal resources to inject into struggling businesses
Limited Access to Capital
North East businesses often report greater difficulty accessing finance compared to companies in London and the South East. This makes it harder to:
- Invest in growth and innovation
- Maintain adequate working capital reserves
- Weather temporary downturns
- Restructure debt during difficulties
Demographic Challenges
An ageing population and the migration of young people to other regions create workforce challenges and reduce consumer spending in specific sectors, particularly affecting retail and service businesses.
Recent Trends: What the Numbers Show
Corporate Insolvencies Rising
Insolvency-related activity in the North East hit a nine-month high in April 2025, with 81 cases—a 24.6% increase compared to April 2024. The region saw the second-highest yearly percentage increase in insolvency-related activity in the UK, behind only Northern Ireland.
While national corporate insolvency numbers fell slightly in 2024 compared to 2023, they remain significantly higher than pre-pandemic levels. For the North East, the pressure hasn’t eased—it’s intensified.
Sectors Under Pressure
Certain sectors are experiencing particularly acute difficulties:
Food and Drink: This sector experienced the highest quarterly rise in financial distress at 21.7%, primarily driven by energy costs, supply chain pressures, and shifting consumer spending patterns.
Retail: Squeezed between online competition, high street costs, and cautious consumer spending. Many North East retail businesses are struggling to compete with national chains and online giants while managing commercial rent obligations.
Hospitality: Rising costs (particularly energy, food, and wages), combined with reduced consumer spending, have created a perfect storm. Many pubs, restaurants, and hotels across the region are barely breaking even.
Construction: The sector has been hit by bad weather, delayed project starts due to the 2024 General Election, and ongoing material cost inflation.
Manufacturing: While still important to the regional economy, manufacturing faces margin pressure from global competition, energy costs, and Brexit-related trade complexities.
Personal Insolvencies at Crisis Levels
The North East also had the highest rate of Breathing Space registrations under the Debt Respite Scheme in 2024, at 24.2 per 10,000 adults. This indicates that many individuals are in the early stages of severe financial difficulty, with formal insolvency potentially to follow.
The cost-of-living crisis has hit North East households particularly hard, and this feeds directly into business insolvency as consumer spending power diminishes.
Key Drivers of North East Business Distress
National Insurance and Wage Increases
Recent increases to Employers’ National Insurance and the minimum wage are creating additional strain, with tighter margins and fluctuating demand making it harder for businesses to stay afloat.
For labour-intensive North East businesses, these cost increases represent a significant percentage of overall expenses. Many businesses are finding it impossible to absorb these costs without:
- Raising prices (risking loss of price-sensitive customers)
- Reducing staff (affecting service quality)
- Cutting other expenses (potentially compromising operations)
Energy Costs
While energy costs have fallen from their peak, they remain significantly higher than pre-2022 levels. For manufacturing businesses and large retail or hospitality premises, energy represents a substantial overhead that’s difficult to reduce without significant investment in efficiency measures that struggling businesses can’t afford.
Debt Accumulated During COVID-19
Many businesses took on significant debt during the pandemic through schemes like Bounce Back Loans, CBILS, and deferred tax payments. High levels of accumulated debt may still lead to a large number of insolvencies.
For some businesses, this debt is manageable during good times but becomes unsustainable when trading conditions deteriorate. The combination of existing debt servicing and current trading pressures is proving fatal for many.
Commercial Rent Pressures
Many North East businesses are locked into commercial leases signed during better times. Landlords are increasingly unwilling to negotiate reductions, and businesses face:
- Rent arrears accumulating
- Potential forfeiture proceedings
- Personal guarantee liability for directors
- Difficulty finding alternative, more affordable premises
Creditor Pressure Intensifying
Compulsory liquidation levels have increased as creditors pursue debts they are owed to balance their own books. This creates a domino effect—as one business fails, its creditors face cash flow problems, potentially leading to further insolvencies.
HMRC in particular has become more aggressive in pursuing tax debts, issuing winding-up petitions more readily than in recent years.
Warning Signs for North East Businesses
If you’re a North East business owner, watch for these indicators that your business may be heading toward financial distress:
Cash Flow Deterioration
- Struggling to pay suppliers on time
- Needing to prioritise which bills to pay
- Relying on overdraft more frequently
- Directors lending money to the business
- Delay in paying VAT or PAYE
Operational Changes
- Reducing staff or hours
- Delaying maintenance or investment
- Losing key contracts or customers
- Unable to take advantage of growth opportunities due to cash constraints
- Suppliers demanding payment up front or on delivery
Creditor Actions
- Receiving statutory demands
- County Court Judgments are being registered
- Suppliers placing accounts on stop
- The bank is reducing or withdrawing facilities
- HMRC threatening enforcement action
Market Conditions
- Competitors closing or entering insolvency
- Major local employer announcing redundancies
- Key customers experiencing financial difficulties
- Sector-specific challenges intensifying
What North East Businesses Should Do
1. Act Early
The single most important message: seek advice as soon as you recognise problems. Many people and businesses who come for advice too late could have achieved a more positive outcome if they had reached out sooner.
Early advice provides more options. Waiting until creditors issue legal proceedings dramatically reduces your choices and increases costs.
2. Get Regional Expertise
Work with insolvency practitioners who understand the North East business environment. Regional knowledge matters—practitioners familiar with local factors, creditors, and market conditions can often find solutions that outsiders might miss.
Local practitioners also have relationships with regional lenders, potential buyers, and other professionals that can be invaluable in rescue situations.
3. Understand All Your Options
Don’t assume liquidation is the only answer. Depending on your circumstances, options might include:
- Company Voluntary Arrangement (CVA): Restructure debts while continuing to trade
- Administration: Protect the business while exploring rescue or sale options
- Business Sale: Sell as a going concern, preserving jobs and value
- Restructuring Plan: New statutory process offering flexibility for viable businesses
- Informal Arrangements: Negotiate directly with creditors outside formal insolvency
4. Consider the Regional Context
When evaluating options, factor in regional considerations:
- Potential buyers for North East businesses may be more limited than in other regions
- Asset values may be lower, affecting liquidation returns
- Labour availability and costs differ from national averages
- Local authority and regional development support may be available
- Industry-specific grants or support schemes
5. Protect Yourself Personally
North East directors should be particularly aware of:
- Personal guarantee exposure (common for commercial leases and lending)
- Potential director disqualification risks
- The importance of maintaining proper records
- Their duties when a company is insolvent
- The risk of wrongful or fraudulent trading
Support Available for North East Businesses
Local Resources
Several organisations provide support for struggling North East businesses:
- Growth Hub North East: Business support and advice
- North East LEP: Economic development resources
- Federation of Small Businesses (FSB): Member support services
- Local Chambers of Commerce: Business networks and guidance
- Banks and Lenders: Many have specialist teams for businesses in difficulties
Government Schemes
Various government support remains available:
- Help to Grow schemes
- Innovation funding
- Export support
- Skills development grants
- R&D tax credits
Professional Advisors
Early engagement with professionals is crucial:
- Licensed insolvency practitioners for formal advice
- Accountants for financial planning and forecasting
- Business advisors for operational improvements
- Solicitors for legal issues and negotiations
Looking Ahead: The Outlook for North East Businesses
The immediate outlook remains challenging. High levels of accumulated debt may lead to a large number of insolvencies still to come. The full impact of recent National Insurance and wage increases won’t be seen until later in 2025.
However, it’s not all doom and gloom. The North East has weathered economic storms before and emerged stronger. The region has:
- A skilled and loyal workforce
- Lower property and operational costs than many regions
- Improving infrastructure and connectivity
- Growing sectors in technology, life sciences, and green energy
- Strong community and business networks
Businesses that take early action, adapt to changing conditions, and seek professional advice when needed are much more likely to survive and eventually thrive.
Take Action Today
If your North East business is experiencing financial difficulties, don’t wait. The statistics show that our region faces particular challenges, but they also show that you’re not alone—help and support are available.
Every business situation is unique, and the right solution depends on your specific circumstances, sector, and goals. What works for one business may not work for another, which is why professional advice tailored to your situation is so important.
As Newcastle-based insolvency practitioners, we understand the regional context and the specific challenges North East businesses face. We’ve helped countless local companies navigate financial difficulties, and we’re here to help yours, too.
Connect Insolvency is a Newcastle-based licensed insolvency practice serving businesses across the North East. We understand regional challenges and provide practical, expert advice to help local businesses find the best path forward. Contact us today for a free, confidential consultation about your business situation.