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Corporate restructuring activity continues to rise, according to the latest European EY-Parthenon Restructuring Pulse Survey. The latest survey of nearly 200 senior banking professionals across more than 30 countries shows that corporate stress is expected to increase further across Europe, with activity now expected to peak in the first half of 2026 — six months later than respondents predicted in March 2025. This protracted restructuring cycle reflects the impact of ongoing sluggish growth and persistent uncertainty which continue to weigh on businesses.
Respondents still expect to see a slow build up in restructuring cases across Europe. But the picture is far from uniform, with sectors and countries most exposed to macroeconomic and policy volatility expected to feel the most acute strain.
Despite rising levels of restructuring activity, most workout European bankers anticipate that consensual approaches will remain the norm. But the survey also highlights how restructuring strategies continue to evolve, including the greater use of liability management exercises (LMEs), an increase in new funding from shareholders and distressed asset investors, as well as more mergers and acquisitions (M&A).
As we saw in the last survey, the focus remains on preserving value whilst enabling long-term business transformation – whatever the next 12 months brings.
EY-Parthenon Restructuring Pulse Survey
Corporate restructuring activity across Europe continues to rise, but the pace remains measured with ‘microclimates’ of sector and regional stress.
According to the latest EY-Parthenon Restructuring Pulse Survey, 52% of European workout bankers reported an increase in restructuring cases during the first half of 2025, with nearly 60% expecting further growth in the second half. Despite this growth, more than three-quarters (82%) also believe that the peak of restructuring activity is still to come in 2026 or even later—a notable shift from March’s forecast of a H1 2025 peak. This delay reflects the uncertainty of today’s economic environment, and the mounting challenges faced by businesses amidst sluggish growth and persistent geopolitical and policy change and uncertainty.
Restructuring activity increased across Europe in H1 2025, with further uptick expected in H2 2025
Most European workout bankers still expect this to be a relatively slow-burning cycle. Just over a quarter anticipate portfolio increases of up to 10% in H2 2025, whilst a similar proportion expect rises of 10–25%.
Unlike previous waves driven by systemic shocks, this cycle is unfolding gradually. Many companies remain cushioned by liquidity and long-dated debt secured during the ultra-low-interest rate era around the pandemic.
This buffer has delayed distress, leading to a slow accumulation of corporate stress points rather than a sudden surge. However, it’s clear that the challenges are building—particularly in sectors and regions where global shocks and local factors intersect.
Eastern Europe is emerging as the epicentre of expected restructuring activity, followed by Western Europe, the UK and Ireland, Southern Europe, and the Nordics. Nearly half (43%) of Eastern European respondents expect activity to rise by more than 10% in H2 2025, compared to one-third in the UK and Western Europe, a quarter in Southern Europe, and just 13% in the Nordics.
More Eastern European respondents also expect the cycle to extend beyond mid-2026, signalling a deeper and more prolonged period of distress in the region. These variations reflect local sector dynamics and geopolitical and policy factors that are creating distinct ‘microclimates’ of corporate stress.
Restructuring activity is expected to peak in H1 2026, followed by sustained workout volumes into H2 2025
EY-Parthenon Restructuring Pulse Survey
Corporate restructuring activity is rising across Europe with the sectors most vulnerable to slow growth, geopolitical risk and policy volatility in focus.
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Since March 2025, tariffs and trade tensions have grown more prominent, but they are just one part of a broader set of geopolitical and policy challenges weighing on businesses. The survey shows that falling sales are expected to be the biggest driver of restructuring in H2 2025, closely followed by slower economic growth, with geopolitical stress, labour costs, and regulatory change also rising in significance. Meanwhile, input cost pressures are easing across the region due to falling energy prices, declining interest rates, and improving credit conditions.
These findings align with the EY European CEO Outlook, which identifies geopolitical and trade uncertainty as the top two risks facing companies over the next 12 months1. Sixty percent of CEOs in the survey said that they expect elevated levels of geopolitical and economic uncertainty to persist into the medium and long term, prompting a rethink of investment plans and strategic priorities. In the UK, this sentiment is underlined by a record number of profit warnings in 2025 that have been triggered by policy and geopolitical volatility2.
Sector spotlight: Automotive, Manufacturing and Construction
European workout bankers expect Automotive, Manufacturing, and Construction to remain the top three sectors in their portfolios through H2 2025, consistent with H1 2025 survey findings. These sectors are highly exposed to macroeconomic, fiscal, and geopolitical pressures, alongside local and industry-specific challenges. Their continued prominence underscores potential concerns for policymakers, given their strategic role in supporting local economies.
The ten sectors with most actual and expected restructuring activity
How EY-Parthenon can help
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Read moreThe automotive sector faces mounting pressure from shifting market dynamics, evolving customer expectations, structural cost challenges and intensifying competition from Asian and technology players. Stricter regulations and rising capital costs are adding to the strain, making business transformation critical, yet difficult, particularly for large organisations. Tier 2 and 3 suppliers are especially vulnerable, hit by fierce Chinese competition, US tariffs and a delayed transition to electric vehicles that has compressed margins.
Mixed growth - stagnating in North America and Europe but expanding in Asia – combined with high fixed costs and persistent overcapacity, has left many European automakers exposed. Eastern Europe offers cost advantages and continues to attract investment, although some manufacturers are shifting production to even lower-cost regions such as North Africa, reducing Eastern Europe’s advantage.
UK respondents rank automotive as the second highest for expected restructuring activity. Whilst recent flexibility in Zero Emission Vehicle (ZEV) legislation offers some relief, the industry still lags its mandate target. International competition has also intensified, whilst the impact of cyberattacks has triggered stress across the supply chain.
Europe’s manufacturing sector is grappling with structural and cyclical challenges. Sluggish growth and weakening demand are eroding revenues, whilst high energy costs, particularly in Germany, Central and Eastern Europe, continue to squeeze margins. Rising financing costs add further pressure, making it harder to fund operations and invest in modernisation. Global competition is intensifying, with Asian manufacturers gaining market share through cost advantages and technological innovation.
These pressures are compounded by geopolitical uncertainty, including trade tensions and tariffs. Beyond macroeconomic headwinds, manufacturers face significant business transformation demands, including electrification, digitisation, and climate neutrality that require substantial investment and additional layers of cost and complexity.
The survey suggests that we’re seeing a stabilisation of pressures in construction, but with regional pockets of stress - especially in the UK this is identified by respondents as the sector with the highest corporate stress levels. Interest rates have fallen, but fiscal tightening and reduced public spending are constraining infrastructure investment, whilst financing costs continue to weigh on developers and contractors managing capital-intensive projects. Labour shortages and rising employment cost in skilled trades also remain acute. Slower economic growth and weakening demand in both residential and commercial segments compound these challenges, leaving many firms with overcapacity and limited flexibility.
In the UK, regulatory changes such as the Building Safety Act (BSA) have also added compliance complexity and cost, further squeezing margins in an already low-margin industry. These pressures have contributed to a wave of profit warnings, signalling significant strain across the sector.
Beyond these three industrial sectors, consumer-facing industries also remain in focus particularly in Western Europe, where retail is expected to be the second biggest sector in workout bankers’ portfolios in H2 2025 with hospitality ranking third highest in the UK. Reluctance to spend on non-essential items is driven by uncertainty and inflation concerns, whilst rapidly changing consumer preferences add further complexity for companies in the consumer products and retail sector.
EY-Parthenon Restructuring Pulse Survey
Local and sector dynamics are amplifying global shocks, creating a fragmented and unpredictable corporate restructuring cycle that demands regional insight to navigate.
Global shocks may have set the stage for Europe’s restructuring cycle, but local and sector-specific factors are now dictating its pace and severity. This is creating a more fragmented and unpredictable cycle than in previous years, making regional insight critical for businesses and advisors navigating one of the most complex restructuring landscapes in decades.
Whilst slower economic growth and falling sales are key drivers of corporate restructuring across Europe, UK respondents highlight more acute concerns around labour shortages and supply chain risks than their European peers. The UK’s service-sector-focussed economy is less exposed to tariffs and trade tensions, but highly sensitive to rising employment costs due to its labour-intensive industries. Although supply chain disruption is not at 2021 levels, emerging risks, including cyber vulnerabilities, are also adding complexity to operational planning.
Sector-specific challenges are also intensifying. As well as construction and automotive, UK respondents expect to see the highest restructuring activity in H2 2025 in healthcare, hospitality and real estate. Healthcare is under strain from labour costs and funding constraints, whilst hospitality is hit by rising wage bills and weakening consumer spending. These dynamics underscore the need for tailored restructuring strategies to preserve value and enable long-term business transformation.
For healthcare, this could involve addressing labour costs and securing sustainable funding models. Hospitality may need operational streamlining and pricing flexibility, whilst real estate could focus on portfolio optimisation and refinancing. Solutions need to reflect the local and sector landscape to preserve and create long-term value.
EY-Parthenon Restructuring Pulse Survey
Companies and their stakeholders are increasingly turning to more sophisticated, flexible strategies to preserve value and position for recovery.
The survey highlights a continuing emphasis on proactive, consensual approaches that balance short-term stability with long-term business transformation. “Amend and extend” debt restructuring continues to dominate actual and expected activity, reflecting a strong preference for minimising near-term disruption whilst giving borrowers and lenders critical breathing space to reassess capital structures, align stakeholder interests and preserve value during periods of uncertainty.
“Amend and extend” remains the most common restructuring solution, followed by refinancing and operational turnaround
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Find out more about key UK and European corporate restructuring trends and strategies in the latest EY-Parthenon Restructuring Pulse survey.
Refinancing is also expected to play a leading role as businesses recalibrate capital structures in response to post-pandemic debt maturities and shifting growth expectations. Companies adapting to rapid market changes through supply chain diversification, market expansion or digital transformation, are seeking loan terms that better align with their strategic direction. However, feasibility depends heavily on shareholder support and credible turnaround plans, which our survey shows workout bankers view as critical to securing lender confidence.
In H2 2025, existing lenders and shareholders are expected to remain the primary sources of new funding, leveraging their familiarity with the business and vested interests. However, expectations are shifting, with more companies anticipated to secure capital from new shareholders and debt funds, including distress-focussed investors. This reflects changing market dynamics and investor appetite. These entrants often bring greater flexibility in structuring deals and a willingness to take calculated risks. Whilst this can inject fresh momentum, it also demands careful alignment of stakeholder interests to avoid fragmentation and ensure sustainable outcomes.
Beyond financial fixes, the survey reveals a growing recognition that deeper operational changes are essential for long-term stability. Strategies such as operational turnarounds and accelerated M&A are gaining traction. In Germany and the UK, accelerated M&A activity is more prominent, supported by mature private equity markets and service-heavy economies where consolidation offers rapid synergies. However, reconciling buyer and seller price expectations remains a challenge in a difficult market.
As restructuring pressures intensify, companies and stakeholders are increasingly turning to sophisticated, flexible strategies that preserve value and position businesses for recovery. In the UK and Nordics, around 40% of respondents expect increased use of LMEs, reflecting a broader shift towards more innovative and tailored restructuring solutions. In markets with more flexible legal frameworks these strategies can be deployed more swiftly, enabling businesses to respond to market shifts and investor expectations with agility.
Ultimately, the success of any strategy depends on early action, credible turnaround plans, and the ability to mobilise the right mix of capital, expertise, and stakeholder alignment. As the cycle evolves, those who embrace innovation and transformation, rather than delay, will be best positioned to emerge stronger.
A special thanks to David Koudela - EY-Parthenon Director, Turnaround and Restructuring Strategy, Ernst & Young, s.r.o (EY Czechia) - for his support in conducting this survey.
European workout bankers surveyed by EY-Parthenon expect restructuring activity to rise further, peaking in H1 2026—particularly in Eastern Europe and in industrial sectors. However, the outlook varies significantly by country, shaped by a combination of local, regional and global challenges. This mix of sector-specific downturns, geopolitical tensions and macroeconomic uncertainty underscores the need for tailored restructuring strategies to navigate an increasingly complex economic and geopolitical landscape.
