Corporate Distress Rises to Record Level in Europe, Restructuring Activity Increases in Switzerland

Zurich, 22 July 2024 – According to the latest Alvarez & Marsal Distress Alert, financial distress across European corporations has increased by 10% year-on-year. Nearly 9.2% of European companies are now in distress, with over 2,500 businesses having notably weak balance sheets.

The UK and Germany have reported some of the highest distress levels, with the UK seeing nearly one in ten companies in trouble. Germany follows closely with 9.4% of its corporations facing distress. The report highlights that consumer-facing industries, particularly fashion retail, media, and entertainment, are among the most affected sectors in Europe.

In Switzerland, corporate distress levels in 2023 have improved, decreasing to 5.2% from 6.1% the previous year. However, the healthcare and chemicals sectors remain critical, with increased restructuring activities observed. About 10.3% of healthcare businesses were in distress in 2023, attributed to high inflation, energy costs, and investment needs.

Despite the improvements, Swiss companies face challenges due to the deferred adverse effects of the pandemic, compounded with rising interest rates. Alessandro Farsaci from A&M Switzerland noted that the recent decline in interest rates and stabilization of inflation could create favorable conditions for refinancing in the future.