The retail and consumer goods industry has emerged as the most distressed sector in Europe, with distress levels now the highest since the global financial crisis.
This is according to the latest Weil European Distress Index (WEDI), which says the downturn is being 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.
The 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 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. WEDI noted that the combined effect is leaving businesses with less capacity to absorb shocks, with resilience becoming a critical concern.
Andrew Wilkinson, Partner and Co-Head of the legal services firm, 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.”
NAM Implications:
- Taking these findings at face value…
- …9 out of 10 organisations may be tempted to take a ‘wait & see’ approach…
- …whilst risk-averse organisations may take a similar position.
- It follows that opportunities can exist for those who are prepared to act now…
- …on the basis that any growth in flat demand markets has to come at the expense of rivals.
