Breaking Property News 14/1/26
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Latest Weil European Distress Index (WEDI) points to a materially more fragile outlook
Europe’s corporate distress picture appeared to stabilise on the surface in Q4 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.
Sector trends: Q4 2025 data and 2026 outlook
Retail and Consumer Goods emerged as the most distressed sector in Q4 2025, rising to its highest level since the global financial crisis. The quarter saw acute pressure on both liquidity and profitability, as 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, as 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.
Industrials ranked as the second most distressed sector this quarter, reflecting delayed capital spending, subdued demand and a volatile trade environment, with distress forecast to increase further in 2026. Pressure is being driven in part by Europe’s struggling automotive sector, where intensifying competition from Chinese manufacturers and uncertainty around electrification policy continue to weigh on investment as companies adapt to evolving regulatory requirements.
Meanwhile, Infrastructure is forecast to become the third most distressed sector in 2026, having moved into positive distress in Q4 2025 for the first time since late 2021. Pressure is expected to intensify as tightening public and private capital flows constrain new investment, particularly for long-duration projects exposed to higher funding costs, regulatory and planning uncertainty and delayed project pipelines.
Elsewhere, there are some signs of improvement. Despite being the third-most distressed sector in Q4 2025, Healthcare is expected to see distress continue to ease in 2026. That said, underlying vulnerabilities remain, with private investment still cautious across the industry, pointing to latent fragilities beneath an otherwise improving headline picture.
Neil Devaney, Partner and Co-Head of Weil’s London Restructuring practice, said: “A modest easing in the aggregate index at the end of 2025 should not be mistaken for a broad‑based recovery. 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.”
Country trends: Q4 2025 data and 2026 outlook
Country‑level distress continues to diverge sharply across Europe. The region’s largest powerhouse economies – Germany, France and the UK – are all facing tightening distress, as weak economic prospects and limited fiscal headroom constrain policymakers’ ability to ease macroeconomic conditions. By contrast, Spain and Italy continue to record the lowest levels of distress, supported by comparatively stronger growth dynamics and a resilient tourism sector.
Having recorded close to 24,000 insolvencies in 2025, Germany remains the most distressed market in Q4 2025, with distress expected to rise further in 2026. Its reliance on industrial exports has left the economy vulnerable to growing competition from China and broader volatility in global trade policy.
France is the second most distressed market, with pressure concentrated across liquidity and profitability in the last quarter of 2025. Ongoing political uncertainty continues to undermine business confidence and investment, with distress expected to rise further in 2026 until greater fiscal stability is restored.
Ranking third this quarter, the UK has seen elevated pressure across liquidity, profitability and risk metrics, amid subdued business confidence and cautious investment. While the Spring Budget was less damaging to consumer demand than initially feared, it has done little to lift sentiment. Retail and Consumer Goods is expected to face renewed strain as higher National Insurance contributions and an increased minimum wage add to corporate distress in 2026.
Andrew Wilkinson, Partner and Co-Head of Weil’s London Restructuring practice, said: “The outlook for Europe’s largest economies in 2026 is defined less by a single trajectory and more by pervasive uncertainty. In particular, the challenges around structural shifts – from the adoption of GenAI, rapid increase in defence spending, debt burdens at sovereign level, US-EU relations and climate transition – alongside general geopolitical and policy uncertainty, are weighing heavily on investment decisions. Elevated financing costs and fragile demand are pushing firms to prioritise liquidity over long-term capital deployment, reinforcing uneven distress across sectors and countries. Germany, the most distressed market in the index, is a particular concern, although the government’s stimulus programme could help ease pressure over time, with Industrials and Infrastructure best placed to benefit.”
Andrew Stanton Executive Editor – moving property and proptech forward. PropTech-X
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