Levels of advanced financial distress in the North East have seen a marked rise in the final quarter of 2019 with a double figure increase since the same period the previous year.

The latest Red Flag Alert data from insolvency specialist Begbies Traynor, which monitors the UK’s financial health, shows that in the North East in Q4 2019, there was a 69% rise in ‘critical’ or advanced distress (which relates to businesses with CCJs of more than £5,000 filed against them) since the final quarter of 2018.

Instances of ‘critical’ distress in the region also grew by 35% since Q3 2019. This compares with UK-wide figures of a 5% fall in ‘critical’ distress year on year; and a 13% decrease quarter on quarter.

Some of the sectors in the region which fared worst compared with the final quarter of 2018 were bars and restaurants, and industrial (both with 100% increase in ‘critical’ distress); and construction and support services (50% rise).

However, levels of businesses in the North East experiencing ‘significant’ distress (which are those with minor CCJs of less than £5k filed against them or which have been identified by Red Flag’s proprietary credit risk scoring system) appear to have stabilised with 9,684 instances in Q4 2019. There has been no increase in this type of early distress since Q3 2019 or compared with the same period the previous year. Across the UK as whole, ‘significant’ distress grew by 1% quarter on quarter and by 3% year on year.

In the North East, the sectors which performed most strongly were utilities (14% fall in ‘significant’ distress since the same period the previous year); wholesale (13% fall); printing and packaging (down 10%); and financial services and travel and tourism (both fell by 8%).

Gillian Sayburn, partner at Begbies Traynor’s Newcastle upon Tyne office, said: “While it is worrying to see instances of advanced distress in the North East growing much more quickly than in the rest of the UK, this may simply be a lag and, fortunately, levels of early distress in the region are stable, indicating that, in time, ‘critical’ distress will also fall.

“With the general election behind us, some of the political uncertainty that has held back business and household spending has now lifted and, hopefully, businesses can start to plan for their post-Brexit future although they still await clarity on many aspects of the deal. What’s more, with the long term picture for the economy looking set to be one of relative weakness, businesses would be wise to proceed with caution and steel themselves for a bumpy road ahead.”