Retailers and consumer goods groups entered the latest round of geopolitical instability with distress risk already at a high level, according to a new report.
The sector remains the most distressed in Europe, with levels of default risk in the first quarter of 2026 significantly higher than a year ago and at its highest level since the global financial crisis, the latest Weil European Distress Index revealed.
Profitability remains the key pressure point, with companies facing rising operating costs – particularly wages – alongside softer consumer demand and more cautious spending. As a result, the sector remains highly exposed to any renewed squeeze on costs and demand.
Corporate distress overall was above the long-run average in the quarter and, notably, was already higher than before the 2022 Ukraine war energy crisis – indicating many businesses were entering this period of renewed cost pressure from a weaker position, Weil said.
The UK was the third-most distressed market in Europe – behind Germany and France – with pressure spread across liquidity, profitability and risk.
While distress has improved compared with a year earlier, the overall backdrop remains fragile, with soft growth, rising unemployment and continued margin pressure weighing on businesses.
The UK is particularly sensitive to interest rate dynamics, with hopes of monetary easing already complicated by the latest energy-driven inflation risks, with the Bank of England holding rates at 3.75% at its most recent meeting.
If these pressures persist, any delay to rate cuts would further strain businesses, particularly those with limited pricing power or greater exposure to consumer demand, Weil found.
“What’s striking here is not just that distress remains elevated, but where we are in the cycle,” said Andrew Wilkinson, partner and co-head of Weil’s London restructuring practice.
“Businesses are entering a period of renewed volatility already under pressure, which leaves far less room to absorb further shocks. The key risk is pace. If energy prices remain elevated and confidence continues to weaken, we could see stress build more quickly than in previous cycles – particularly for companies that have already delayed investment or are operating with tighter margins.”
Neil Devaney, partner and co-head of Weil’s London restructuring practice, added: “The more important story isn’t at the very top of the rankings – it’s how distress is starting to evolve beneath the surface. We are seeing continued pressure in industrials, alongside early signs of stress emerging in infrastructure, utilities and power. This matters because these are capital-intensive, system-critical sectors. If pressure continues to build here, it points to a broader and more entrenched cycle of distress, rather than one confined to consumer-facing industries.”
The Weil index is an early indicator for corporate distress and default rates, offering a forward-looking view of underlying pressures in Europe’s corporate sector.
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