Distress among industrial companies across the continent has spiked over the last quarter and reached its highest level yet among UK businesses, according to the latest European distress index from law firm Weil.
Drawing on data from over 3,750 listed corporations and financial market indicators, the index shows the industrial sector has moved from fourth to the second most distressed sector in Europe – behind only real estate, which tops the list once again.
Investment pressures, climbing capital costs and a reduction in new project commitments in the third quarter of the year have echoed the broader slowdown in demand and are behind the slump, Weil said.
Distress has eased slightly for real estate compared with the previous quarter and year, although it remains the most distressed sector.
Retail distress has risen both quarterly and yearly, as declining household finances have reduced consumer spending and company profits.
Distress among UK businesses rose to its highest level in 2024, driven by weaker investment metrics, poor profitability and limited liquidity. Growth slowed from 0.7% in the first quarter to 0.5% in the second quarter but showed no month-on-month growth in either June or July, suggesting further weakness.
“While sectors like real estate and industrials are facing significant pressures from rising costs and reduced investment, markets like Spain and Italy are showing resilience,” a Weil spokesperson said.
“However, the coming months will be pivotal, with the US election, Germany’s ongoing electoral process and the UK’s Autumn Budget all likely to introduce further volatility. Businesses will need to prepare for potential shifts in trade policies, fiscal tightening, and market uncertainty, which could further widen the gap between resilient and distressed sectors.”