(Bloomberg) -- Credit stress among European industrial companies rose during the third quarter to the most since the depths of the pandemic as weaker demand and investment pressures weigh on the sector.
Those companies are facing the highest level of distress since September 2020, according to the Weil European Distress Index, which tracks financial market conditions and company performance. Manufacturing powerhouse Germany remained the country experiencing the most distress among the continent’s major economies, the study by law firm Weil, Gotshal & Manges also said.
Geopolitical dynamics are “exacerbating the situation, with persistently high energy prices, especially impacting German industry, and a reduction in Chinese demand for manufactured goods,” Weil said in its report. “These factors are not only cyclical but increasingly structural, posing longer-term challenges to the sector’s recovery.”
The gauge of distress among European industrials spiked in the third quarter, driven in part by insolvencies and job cuts, the report said. Volkswagen AG announced that it was considering plant closures in Germany for the first time in its history, while UK shipyard owner Harland & Wolff filed for administration last month. A unit of Swedish EV battery maker Northvolt AB filed for bankruptcy protection on Tuesday, amid a slowdown in demand for electric cars.
The report’s other findings included:
- Last quarter saw corporate distress among UK businesses hit the highest levels so far this year, as investors pause before the new government’s first budget at the end of this month
- Southern European economies such as Spain and Italy have fared better than others
- Distress eased slightly among European real estate fell but it remained the most impacted sector, just ahead of industrials
--With assistance from Libby Cherry.
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