Retail and consumer goods remains Europe’s most distressed sector, reaching its highest level since the global financial crisis as rising costs, weak consumer demand and pressure on profitability continue to weigh on the industry.
The latest Weil European Distress Index (WEDI), which tracks more than 3,750 listed European companies, found that distress in the retail and consumer goods sector rose both quarter-on-quarter and year-on-year in August.
The sector recorded a distress score of +8.1, up from +6.0 a year earlier, with profitability, investment, liquidity and valuation all under pressure.
Weil said inflation, pressure on household finances and fragile consumer confidence were continuing to undermine discretionary spending, while higher energy, transport and financing costs were adding further pressure on retailers’ margins and cash flow.
Retail and consumer goods was followed by industrials, with a distress score of +5.1, infrastructure at +3.8 and real estate at +2.6.
Across Europe, the overall WEDI score eased slightly to +2.7 in August from +2.8 in May, remaining above its long-run average. Weil said European companies had absorbed the initial impact of the Middle East conflict better than expected, although financing conditions and wider economic pressures remained challenging.
Andrew Wilkinson, Partner and Head of Weil’s London Restructuring practice, said: “The latest data suggests businesses have absorbed the first wave of geopolitical and economic disruption better than many expected. But resilience should not be mistaken for recovery.”
“Distress remains above normal levels, and financing conditions are still challenging. If borrowing costs remain elevated while demand and margins stay under pressure, we could see this continued level of distress begin to feed through into higher default rates across Europe.”
The UK was the third most distressed market in the index, with a score of +4.0 in August. This was down from +4.4 in May but above +3.6 a year earlier, with profitability the largest source of pressure, followed by liquidity and investment.
UK GDP grew 0.4% in the second quarter, while business investment increased 1.7%. However, the effective interest rate on new corporate bank loans stood at 5.62% in July, rising to 6.61% for SMEs.
The findings come against a backdrop of mounting cost pressures for UK retailers. Earlier this month, the British Retail Consortium found that retail businesses faced an effective tax rate of 71.5% in 2025/26, the highest of the 11 sectors it analysed, with the trade body warning that rising business taxes were putting pressure on jobs, investment and prices.
The BRC has also reported that UK retail employment fell to its lowest four-quarter average on record in 2025, while retailers cited rising labour costs and falling demand among their biggest concerns.
Jenny Davidson, Partner in Weil’s London Restructuring practice, said: “France remains a place to watch, as is Germany. The sector picture shows retail distress at its highest level since the Global Financial Crisis, but the nature of that distress is very different.”
“Profitability and liquidity now play a much greater role as retailers contend with higher costs, rising interest rates and uneven consumer demand. If those pressures persist as the upcoming maturity wall is hit, we are likely to see a widening gap between businesses with the balance-sheet flexibility to absorb them and those with much less room for manoeuvre.”