It’s tough out there and will probably get tougher. Europe’s retail and consumer goods sector emerged as the most “distressed” in Q4 2025, rising to its highest level since the global financial crisis, according to a new report.
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And the outlook is “materially fragile moving into 2026”, according to the aptly-named Weil European Distress Index (WEDI).
The quarter saw acute pressure on both liquidity and profitability, citing “weak demand, persistent cost inflation and tighter consumer spending continued to squeeze margins”.
Looking ahead, distress in the sector is expected to deepen further in 2026, citing “rising input costs – including increases in the UK minimum wage – begin to feed through more fully”.
Ongoing uncertainty in global supply chains, as trade settlements remain in flux, adds further downside risk, it added.
In all commerce, “liquidity and profitability pressures remain acute and distress is becoming increasingly uneven across sectors and countries”, the report continued. “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.”
And while the UK was ranked third behind Germany and France in terms of distress levels in the final quarter of 2025, it has still seen “elevated pressure across liquidity, profitability and risk metrics, amid subdued business confidence and cautious investment”.
Adding to the bleak outlook, Neil Devaney, partner and co-head of Weil’s London Restructuring practice, said:“Distress remains persistent and increasingly uneven, driven by pressure on liquidity and investment. That divergence is most pronounced in Retail and Consumer Goods, which is set to be the most challenged sector in 2026.
“The sector is becoming more polarised, with smaller and mid-sized retailers under the greatest strain, while businesses with stronger balance sheets and established omnichannel models prove more resilient. In the UK, recent Budget measures – including higher National Insurance and Minimum Wage costs – are set to add further pressure into 2026. With growth expected to offer little relief over the coming years, these pressures are unlikely to ease quickly.”
