Retail and consumer goods companies are now the most highly distressed in Europe, as distress levels in the sector reach their highest point since September 2009.
Tight credit conditions, cost inflation and weak consumer demand have contributed to a sharp rise in financial distress in the sector, with the UK under particular strain as consumers rein in discretionary spending amid a 16-month peak in inflation.
Corporate distress across Europe outpaced projections, according to the latest Weil European Distress Index (WEDI), as all 10 European countries studied in the index saw increased levels of distress.
Measured in terms of falling profitability and valuations, insolvency risk, cashflow problems and reduced turn on investment, WEDI only reported only three out of 10 sectors bucking the trend.
Retail’s woes were a “warning sign” for the rest of the economy, said Andrew Wilkinson, partner and co-head of Weil’s London restructuring practice.
“Rising costs and falling confidence are pushing firms to their limits,” he said.
“In a more fragile macro environment, businesses are more vulnerable to shocks – whether that’s a cyberattack, a trade disruption or a tightening of credit.”
The accumulation of economic stress, he added, had made it vital to build both operational and financial resilience into business models, as the period of economic volatility stretched onward.
Behind Germany, the UK was Europe’s second-most distressed economy, despite recording a nominal 0.7% GDP growth in Q1 2025. WEDI’s investment, sentiment and valuation metrics all deteriorated, with the firm highlighting a “fragile and uneven” economic recovery. Cost of living pressures and uncertainty over government policy, it said, had both dampened business confidence.
The UK’s own official insolvency statistics for May, pulbished last week (20 June), showed a jump of 8% on April. Monthly company insolvencies in the first five months of 2025 were around the same level as in 2023, when insolvencies reached a 30-year high.
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