European companies are seeing distress rates rise, with retail-sector distress hitting the highest level since the global financial crisis, according to a Weil Gotshal & Manges report.
The Weil European Distress Index showed distress levels increasing across all European markets measured during the second quarter of the year, driven by weaker economic growth, deteriorating confidence and energy market turmoil. Weil says the findings show European businesses are entering the latest period of geopolitical tensions from an already fragile position.
Retail businesses are feeling the greatest pain, with distress reaching the highest level since the global financial crisis on a rolling basis as economic uncertainty and shaky consumer confidence squeeze profits, liquidity, investment and valuations. Renewed pressure from rising energy and transport costs are placing further strain on margins, Weil says.
The industrial sector is also seeing distress levels edge up, though the index remains lower than a year ago. The resurgence in distress is being caused by weak investment conditions and subdued demand, compounded by the war in Iran, which has disrupted supply chains, Weil says.
Meanwhile, the travel, leisure and hospitality sector recorded one of the largest increases in distress in the second quarter, fuelled by higher wage and energy costs, lower consumer spending and exposure to geopolitics.
Germany continues to be the most distressed market in Weil’s index, though, like the industrials sector, levels are lower than a year ago. Weil says Germany’s dependence on manufacturing, exports and energy-intensive industries makes businesses in the country particularly vulnerable to energy shocks and weaker demand. In 2025, German corporate insolvencies hit their highest level since 2014, and Weil says they could rise further this year.
The UK was the third-most distressed country in Weil’s index after France. Weil says pressure is concentrated in investment, liquidity and profitability, with rising costs weighing on business confidence. The IMF reduced the UK’s growth forecast to 0.8% this year from a previous estimate of 1.3% – the largest growth downgrade among markets covered by Weil, the firm said.
Andrew Wilkinson, a partner and head of Weil’s London restructuring practice, said: “European businesses entered 2026 expecting operating conditions to improve gradually. Instead, the outlook has become more uncertain. Distress is now rising across every market we track, profitability has emerged as the biggest source of pressure and the prospect of lower interest rates looks less certain than it did at the start of the year.”
The Weil European Distress Index is based on data from more than 3,750 listed European companies and a range of financial market indicators.
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