LONDON: One in 15 European companies is facing significant restructuring pressure this year due to rising financing costs and weak consumer demand, with Germany, Austria and the Nordic countries under particular pressure, according to a report by the Boston Consulting Group (BCG).
Consulting firm BCG said in a presentation that around a third of companies in Germany and Austria were facing what it called “transformation pressures” – early signs of declining performance and financial stability that need improvement.
This would represent around 21% across Europe, up from 14% in 2023.
The company collected financial information from more than 2,000 listed European companies and relied on company statements and interviews.
The pressure in Austria and Germany comes partly from “the structure of the sector,” said Jochen Schönfelder, a senior partner at BCG in Cologne.
“One reason is its high exposure to China and Russia, and the second is its high exposure to energy-intensive industries.”
He also noted that both countries have been particularly affected by the “consumer crisis”, with demand for fashion and other items falling.
Real estate, telecommunications, media and technology companies and retail were the three most stressed sectors in Europe.
About 68% of real estate companies are showing these early signs of strain, up from about 26% in 2023, according to BCG.
The data highlighted that the continent is still grappling with the effects of sharp rises in central bank interest rates and rising raw material and energy prices following Russia's invasion of Ukraine.
Despite signs of economic recovery in Europe, borrowing costs are expected to remain high and markets are finally pricing in the European Central Bank's two interest rate cuts this year.
Rising interest rates were the main driver of weakness in capital-intensive sectors such as communications and industrials, according to the report. — Bloomberg
