INSOLVENCY rates among North East businesses have risen over 20% in the last year, although the region’s manufacturing is defying the slump with business failure rates in this sector falling.

And the findings from PricewaterhouseCoopers suggest the picture is not as bleak as first seems with business failure rates falling from the first to the second quarter of 2011.

Corporate insolvencies dropped from 4,216 to 3,531 from the first to second quarters, continuing a trend that began at the end of last year. Despite the 16% decrease, the number is still 2% higher than the same period last year. Like all regions, the North East and Cumbria reported a decrease from the first to second quarter.

However numbers were 21% up on last year, while the North West showed an 11% increase and the West 8%.

North East PwC director Sean Hamilton said: “The UK economy is by no means out of the woods yet as we continue to see retailers running into financial difficulties and shutting up shop. The impact of the Government’s public sector spending cuts, which have yet to be felt, are likely to have a further adverse effect on consumer spending and especially on those companies supplying the public sector.

“The trend of falling corporate insolvency levels during the recent recession has been rather atypical but this is partly due to a combination of factors which have provided breathing space for many struggling businesses.