New business formation in the North East fell 9 per cent year on year in the second quarter of 2026 while insolvency activity rose 5 per cent, according to R3’s latest Business Health Report.
The region recorded 4,022 new company registrations and 211 insolvency-related cases in the three months to June. That was the third-sharpest fall in new registrations among UK regions, and the only one of the three worst performers where insolvency activity also increased.
Nationally, registrations fell 6 per cent and insolvency activity fell 6 per cent. The North East produced fewer new firms and more insolvency-related cases at the same time.
The figures do not explain why. They do show the pressure facing a region that already has a relatively thin business base, just as its growth plans assume a stronger pipeline of new companies.
"R3's latest Business Health report suggests many would-be entrepreneurs are taking a cautious approach to launching new ventures," said Kerry Pearson, R3's North East chair and a restructuring and insolvency director at Armstrong Watson, the accountancy and business advisory firm. She said that mattered because "sustainable economic growth depends on a healthy pipeline of new businesses entering the market," and pointed to higher employment costs, geopolitical uncertainty, consumer demand and cashflow pressure as reasons starting a business can feel like a greater risk than it used to.
That explanation doesn't obviously fit the region on its own terms. Of the three regions with the steepest year-on-year falls in start-ups, Northern Ireland (down 15.7%) and Wales (down 15.1%) both saw insolvency activity fall too, in line with the report's own national framing of fewer failures and fewer start-ups at once.
The North East, down 9.0% on start-ups, is the only one of the three where insolvency activity rose instead, by 5.0%. Fewer businesses are being formed and more of the existing ones are failing, at the same time, in the one region of the worst three for start-up decline where that combination holds. R3's report doesn't say why.
The region was already starting from a thin base. The most recent published business-density figures, from 2023, put the old North East LEP area at 443 private enterprises per 10,000 working-age adults, against 615 for England outside London, one of the lowest rates of any English region.
A percentage fall on a base that low shows up more starkly than the same fall would somewhere denser.
It also lands awkwardly against the region's own growth planning. The North East Mayoral Strategic Authority's Corporate Plan 2026-30 says its Elevate and Accelerate Funds will support 470 businesses to create 2,300 jobs over the next 15 years.
The plan also says the wider North East Fund, launching the Inspire, Elevate and Accelerate Funds together, will have supported over 110 companies to create over 650 jobs by 2028.
Neither figure is a business-registration number in its own right, so this quarter's figures aren't a missed target in any strict sense. But the model behind them, more businesses started, supported and grown into the jobs those targets promise, assumes a pipeline that this quarter's data says is thinning rather than filling.
There's a geography point worth being precise about too. R3 splits the country into the standard set of English regions, plus Scotland, Wales and Northern Ireland, the same list used for Greater London, the North West and the rest of the report.
That "North East" total covers both the Mayoral Strategic Authority's three council areas (Northumberland, Tyne and Wear, County Durham) and Tees Valley, which runs its own combined authority, its own mayor and its own growth plan under Ben Houchen.
The report doesn't break the region down any further, so it isn't possible from this alone to say whether the fall in start-ups or the rise in insolvencies is more a Tyne and Wear and Durham story or a Teesside one.
The North East’s new Business and Economy Board, chaired by North East Chamber of Commerce chief executive John McCabe and set up to advise mayor Kim McGuinness on the Local Growth Plan, is well placed to consider what the figures mean for the region’s business pipeline.