The report which covers Q1 2025, prior to the US announcement in early April of global trade tariffs, shows ‘significant’ or early-stage business distress dropping by 12.9% and affecting 10,677 business in the North East, almost 1, 600 fewer than in Q4 2024. However, the year-on-year trend in this type of distress continued to be upward, with a 4.1% rise in the region since Q1 2024.
The pattern was reflected across the UK with a 11.5% fall in business distress since the last quarter of 2024 and a 4.5% hike in distress levels year-on-year, affecting 579,000 companies.
In terms of the more advanced or ‘critical’ distress, in the North East there was a slight uplift of just under 1% in the first three months of 2025 compared with the same period of 2024 with 782 firms in the region affected. In contrast, the UK-wide figure rose by 13.1% year-on-year with over 45,400 companies impacted, while there was a UK-wide drop of 3.1% since the previous quarter compared with a 15% fall in the North East.
Andrew Little, partner for Begbies Traynor in the North East, said: “Despite our latest Red Flag data bearing out some signs of positive economic progress at the start of the year with the rate of inflation falling to 2.6% in March and better growth than had been predicted, this may well be the calm before the storm.
“With Trump’s threat of global tariffs now a reality, the cautious optimism we saw is now firmly in the past as we brace ourselves for the heightened uncertainty of an escalating international trade war and its impact on our own economy. With no businesses in the North East or across the UK likely to escape the fallout, SMEs should once again prepare for some difficult times ahead.”
In the North East, only eight of the sectors monitored by Red Flag Alert saw falls in levels of early distress since the previous year. These included printing and packaging (-18.8%), wholesale (-11%), food and drug retailers (-8.6%) and professional services (-8%).
In contrast, sectors seeing the largest year-on-year increases in significant distress across the North East were media (+25%), hotels and accommodation (+21.3%), real estate and property services (+ 17.4%) and leisure and cultural activities (+11.5%).
Partner Gillian Sayburn added: “While the UK entered the latest crisis in a reasonable shape, we fear that businesses will once again suffer from an environment of uncertainty amid the volatile global trading situation. With the likelihood of greater international competition as goods are diverted from the US market, together with supply chain disruption, as well as predicted rises in inflation and household bills next month, there are plenty of challenges ahead. Our advice to owner-managed businesses who see escalating financial problems is to seek professional advice sooner rather than later when more tools will be available to stabilise a struggling business.”