- Retail and Consumer Goods now the most distressed sector in Europe, reaching the highest levels since September 2009.
- Corporate distress rises across all major European economies and seven out of ten industry groups.
- The UK is Europe’s second most distressed market despite headline GDP growth.
- Broader geopolitical and economic volatility continues to erode business resilience.
(Europe – Thursday 26 June 2025): Retail and Consumers Goods has emerged as the most distressed sector in Europe, with distress levels now the highest since the global financial crisis, according to the latest Weil European Distress Index (WEDI). The downturn is driven by a combination of tight credit conditions, cost inflation and weakened consumer demand – particularly in the UK, where discretionary spending is under severe strain.
This deepening retail distress has become a bellwether for a wider trend: corporate distress across Europe has accelerated more sharply than anticipated at the start of the year. Whilst the WEDI forecast published in January 2025 correctly pointed to a fragile and uneven recovery, the actual pace of deterioration has exceeded initial projections. Distress has risen across all major European economies, with seven out of ten industry groups now worse off than a year ago.
Geopolitical volatility, trade disruption and tighter fiscal policy continue to suppress confidence, limit liquidity and slow investment. At the same time, softer demand and squeezed household finances are impacting revenues. The combined effect is leaving businesses with less capacity to absorb shocks, with resilience becoming a critical concern.
Sector trends: Q2 2025 data and outlook
Having now overtaken all other sectors, Retail and Consumer Goods is facing a sustained squeeze on profitability. Retailers are navigating a challenging mix of rising input costs, margin pressure and subdued consumer appetite – particularly in the mid-market, where financial headroom is limited. UK-based firms are especially exposed, with weak discretionary spending compounding the challenge. Export-facing businesses are also contending with prolonged trade uncertainty, adding further strain on already stretched operations.
By contrast, other consumer-facing industries like Travel & Hospitality have shown relative strength. Discretionary spend on holidays has held up, with consumers often prioritising travel over retail purchases. Business travel remains steady, though hospitality firms continue to face cost and margin pressures.
Trade pressures are also hitting the Industrials sector, now the second most distressed in the Index. Forecasts anticipated some improvement, but persistent input costs, stalled investment and tariff exposure – particularly in steel and automotive – have weighed heavily on manufacturers. Financing remains tight, especially for mid-sized suppliers, with sentiment particularly weak in core markets like Germany.
Real Estate ranks third. Whilst conditions have eased since early 2024, refinancing risks remain high and profitability remains under pressure. Slower declines in asset values and selective repricing have offered a reprieve, but vacancy rates and softening rental markets in key commercial hubs continue to pose challenges.
Andrew Wilkinson, Partner and Co-Head of Weil’s London Restructuring practice, said:
“This quarter’s data confirms a deepening of corporate distress across Europe. Retail’s position is a warning sign: rising costs and falling confidence are pushing firms to their limits. In a more fragile macro environment, businesses are more vulnerable to shocks – whether that’s a cyber-attack, a trade disruption or a tightening of credit. Resilience is being tested not just by one-off events, but by the accumulation of stress. That’s why building resilience into business models is more important than ever – both operationally and financially – to withstand a prolonged period of volatility.
We are seeing less slack in the system and less capacity to absorb future risks. But this is not a uniform story. Whilst distress is clearly mounting, we’re also seeing pockets of resilience, notably in travel, hospitality and defence-adjacent industries, where demand and margins have held up.”
Country trends: Q2 2025 data and outlook
The UK is Europe’s second most distressed economy, despite recording Q1 GDP growth. Beneath the surface, investment, sentiment and valuation metrics have all deteriorated, pointing to a fragile and uneven recovery. Cost-of-living pressures remain acute and policy uncertainty – both fiscal and trade-related – is weighing on business confidence.
Germany continues to record the highest levels of corporate distress amongst major European economies. Whilst this was anticipated, Q2 data indicates that downside risks are intensifying. Manufacturing output and exports remain subdued and the economy is now projected to contract for a third consecutive year – with corporate distress levels nearing those seen during the pandemic.
France saw a modest rise in distress, driven by investor caution and political uncertainty. Exports fell by 5.9% in April and the Bank of France has signalled a subdued Q2 outlook, citing increased trade tensions – including new US tariffs on wine and aerospace – as well as the impact of multiple public holidays.
Meanwhile, Southern European markets, including Spain and Italy, were expected to remain relatively stable in 2025, but both recorded quarter-on-quarter rises in distress. Although growth remains more resilient than in Northern Europe, forward indicators suggest that rising credit costs and declining business sentiment may begin to erode stability in the second half of the year.
Neil Devaney, Partner and Co-Head of Weil’s London Restructuring practice, said:
“Whilst the direction of travel was anticipated, given recent geopolitical events, the increase in signs of distress across Europe is nevertheless striking. Distress levels in the Retail and Consumer Goods sector are now at their highest since the global financial crisis in September 2009, according to our index. The latest data also shows seven out of the ten industry groups surveyed have deteriorated compared with the previous quarter, suggesting a broadening of distress. In the current operating environment, businesses are having to adjust to multiple challenges – from interest rates and input costs to geopolitical and trade disruption – and we’re seeing fragilities surface across the board.”
