Corporate pressure increasing across Europe
Industrials are the second-most distressed sector, partly due to the automotive sector, finds the Weil European Distress Index (WEDI).
Despite appearing to stabilise in quarter four of 2025, the WEDI shows acute liquidity and profitability pressures and increasingly uneven distress across sectors and countries, particularly in Germany, France and the UK.
Pressure on Industrials, as the second-most distressed sector, is being driven in part by the struggling automotive sector in Europe, with intensifying competition from Chinese manufacturers and uncertainty around electrification policies and regulatory requirements.
Distress is also forecast to intensify in the Infrastructure sector.
This is largely due to tightening public and private capital flows constraining new investment, particularly for long-duration projects exposed to higher funding costs, regulatory and planning uncertainty, and delayed project pipelines.
Retail-led corporate distress is expected to rise through 2026, reflecting weaker investment conditions, elevated borrowing costs, and continued uncertainty around trade policy and geopolitical risk.
The Retail and Consumer Goods sector emerged as the most distressed in quarter four 2025, with weak demand, persistent cost inflation and tighter consumer spending.
As rising input costs, including UK minimum wage increases, feed through, the sector’s distress is expected to deepen further. Downside risk from ongoing uncertainty in global supply chains also contributes.
The Healthcare sector is expected to see improvement in 2026, despite being third-most distressed in quarter four 2025. However, underlying vulnerabilities such as cautious private investment across the industry continue to impact it.
While Germany, France and the UK face high pressure due to weak economic prospects and limited fiscal headroom, Spain and Italy are supported by comparatively stronger growth dynamics and resilient tourism sectors.
Partner and Co-Head of Weil’s London Restructuring Andrew Wilkinson says, ‘In particular, the challenges around structural shifts – from the adoption of GenAI, rapid increase in defence spending, debt burdens at sovereign level, US-EU relations and climate transition – alongside general geopolitical and policy uncertainty – are weighing heavily on investment decisions.’
