Europe’s corporate distress picture appeared to stabilize on the surface in fourth quarter 2025, but the latest Weil European Distress Index (WEDI) points to a materially more fragile outlook moving into 2026. Liquidity and profitability pressures remain acute and distress is becoming increasingly uneven across sectors and countries. As a result, corporate distress is expected to rise through 2026, reflecting weaker investment conditions, elevated borrowing costs and continued uncertainty around trade policy and geopolitical risk. This is likely to drive a widening divergence, with pressure intensifying in more exposed sectors and countries while others remain comparatively resilient.
Retail and consumer goods emerged as the most distressed sector in fourth quarter 2025, rising to its highest level since the global financial crisis. The quarter saw acute pressure on both liquidity and profitabili
