North East Business Rides out Tough Economic Conditions

North East Business Rides out Tough Economic Conditions

North East businesses have weathered a challenging year with the region chalking up a drop in insolvency-related activity, a new report suggests. The latest annual report from R3 – the trade body for restructuring, turnaround and insolvency professionals – also shows an increase in the number of new start-ups.

Supported by data from CreditSafe, R3’s reports examine insolvency and start-up activity, highlights sectors under financial stress, and explores key business pressures. The 2025 figures for the region show a 9.3% decrease in insolvency-related activity, which includes administrations and creditors’ meetings as well as voluntary and compulsory liquidations from 863 cases in 2024 to 783 last year.

However, Business Live is reporting that the levels of insolvency activity still remain much higher than five years ago. There was a 3.3% increase over the same period in the number of start-up businesses which rose from 16,897 to 17,455.

In a year-on-year regional comparison the North East was one of the best performing areas, with its annual decline in insolvency related activities topped only by Yorkshire and Humber with a 9.9% decrease and Greater London’s 11% drop.

The R3 Annual Business Health Report also explores sector trends across the UK, with the national picture highlighting a fragile operating environment for many businesses.

Construction continued to account for the highest number of insolvency activities in the UK in 2025 (4,584 cases), despite a modest reduction of 6% on the previous year. The sector was impacted by rising material costs as well as delayed payments, skills shortages and weak investor confidence.

Within the North East, Cramlington based construction specialist Merit went into administration towards the end of the year, with the loss of around 340 jobs, while Union Electric Steel also closed its North East operation in Gateshead, with the loss of 156 jobs. Directors at Merit have since bought assets of the business from administrators to start a new company.

Elsewhere in the UK wholesale and retail (4,124 cases) and accommodation and food services (3,831 cases) also saw rising insolvency activity, reflecting pressure on margins as hard-pressed opted to save rather than spend, in discretionary spending and businesses struggled to absorb or pass on higher costs.