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European corporate restructuring activity is set to rise further in 2025, according to the latest EY-Parthenon Restructuring Pulse Survey. Drawing insights from over 200 workout banking professionals across 25 countries, including the UK, the survey captures a clear expectation of increased corporate restructuring and business failures as companies continue to face economic and sector-specific pressures.
However, this is still a slow burning cycle. Unlike previous corporate restructuring waves triggered by sudden systemic shocks, the current cycle is unfolding more gradually, driven by a complex mix of increased costs, supply chain disruption, geopolitical instability and policy change. Lingering liquidity from pandemic-era support has softened the immediate impact but stress is building steadily.
This pressure is playing out unevenly across Europe, hitting sectors and regions in different ways. In the UK, rising employment costs are a key concern. Western and Central Europe are seeing strain in industrial sectors due to tariffs and energy volatility, whilst Southern economies face slower-moving challenges in tourism and agriculture.
Amid this evolving landscape, the survey reveals a shift toward more proactive, consensual restructuring strategies. ‘Amend and extend’ deals, refinancing and operational turnarounds are becoming the tools of choice—tailored to local market dynamics and designed to preserve value whilst enabling long-term business transformation.
EY-Parthenon Restructuring Pulse Survey
Restructuring activity is on the rise, but the pace remains measured.
Over half (56%) of the EY-Parthenon Restructuring Pulse Survey respondents reported an increase in corporate restructuring cases in their portfolios during the second half of 2024 and 68% expect further growth in H1 2025.
Whilst the trend is upward, the pace is still measured. Unlike previous cycles triggered by sudden economic shocks, this one is being shaped by a prolonged mix of inflation, supply chain disruptions, geopolitical instability and shifting regulatory demands. Many companies have been able to delay or soften the impact of financial distress thanks to sustained liquidity, much of it stemming from pandemic-era government support. As a result, corporate restructuring activity has emerged gradually and is often fragmented and localised in its timing and effects.
The survey data suggests this slow build-up will continue, with one-third (32%) of respondents expecting only a modest increase—up to 10%—in restructuring cases during the first half of 2025. Looking ahead, 48% of professionals anticipate the peak of activity in the second half of 2025, whilst 30% believe it will arrive in 2026, underscoring the uneven nature of the current cycle.
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Read moreThe timing and scale of Europe’s corporate restructuring peak are also expected to vary widely, shaped by both global and local economic pressures. Workout bankers in Western and Central Europe anticipate the sharpest rise in H1 2025, driven by industrial challenges like supply chain issues and energy volatility. In contrast, Southern Europe and the Balkans foresee a slower increase, influenced by gradual shifts in tourism and agriculture. The UK expects steady growth in activity, linked to sluggish economic performance and rising employment costs, whilst Northern Europe remains relatively stable due to lower industrial exposure.
Expectations for the peak of this corporate restructuring cycle also vary across Europe. In Poland, just 8% of respondents believe the peak will occur in 2026, suggesting the cycle is already well underway. By contrast, 31% of UK respondents, 33% in Germany and 49% in Spain expect the peak to arrive in 2026, indicating that more significant corporate restructuring activity is still to come in these markets.
EY-Parthenon Restructuring Pulse Survey
Falling sales, slow growth and geopolitical uncertainty shape the corporate restructuring agenda.
Declining sales and weak economic growth remain the most frequently cited triggers of corporate stress across our survey. However, geopolitical tensions have emerged as a more prominent concern in the last six months, with 16% of respondents identifying them as a key corporate restructuring theme in the first half of 2025, double the share from the second half of 2024. On a more positive note, pressures related to financing and input costs appear to be easing, supported by falling energy prices, declining interest rates and gradually improving credit conditions.
Mounting anxiety over conflict, trade disruptions and policy uncertainty is echoed in macroeconomic and company data. In the UK, a record share of Q1 2025 profit warnings were linked to order delays and cancellations, as companies postponed spending amid rising uncertainty1.
According to the latest EY-Parthenon European CEO Outlook Survey, 42% of CEOs cited geopolitical and trade uncertainty as the top growth risk over the next 12 months, and 78% have altered their strategic investment plans as a result2. More than one-third (40%) also expect to absorb at least some tariff costs. The latest EY European Attractiveness Survey shows that 37% of businesses postponed, cancelled or scaled back European investment plans in 2024, with US tariffs exacerbating hesitancy in 20253.
Whilst macroeconomic concerns are broadly consistent across Europe, regional variations highlight the impact of local challenges. In Poland, proximity to the war in Ukraine has placed geopolitical risk and cost pressures at the top of the list of corporate restructuring triggers in our survey, surpassing even sales and economic slowdown. In the UK, labour costs ranked among the top three concerns for H1 2025, well ahead of geopolitical risks. This reflects the UK’s service sector focus, which reduces exposure to tariffs but increases sensitivity to rising employment costs, due to the labour-intensive nature of many service industries.
EY-Parthenon Restructuring Pulse Survey
Global policy change creates widespread sector impacts.
Our survey shows that the automotive sector was the primary driver of corporate restructuring activity in European workout bankers’ portfolios in H2 2024 and is anticipated to remain so in H1 2025. Even before the increase in US tariffs, automotive companies were under pressure, grappling with falling sales and the capital-intensive shift to electric vehicles. These challenges have been compounded by margin pressures from high fixed costs, underutilised production capacity and higher energy and labour expenses. As a result, the sector is rationalising to restore profitability.
Manufacturing, the second most-cited sector, is also being squeezed by both top-line and cost-side pressures. European manufacturers are facing high input costs, softening demand and intensifying global competition, particularly from Asia, where rivals are closing the technology gap and offering significant price advantages. If US tariffs redirect more Asian exports towards Europe, these pressures could intensify further.
Whilst still elevated, corporate restructuring activity in construction and retail is expected to stabilise. Construction continues to face headwinds from economic uncertainty, labour shortages and lingering cost pressures. Retail, meanwhile, is still challenged by weak consumer sentiment and the ongoing struggle of brick-and-mortar stores to pass on rising costs, such as rent, energy and wages, especially in the face of growing online competition.
Findings from five representative countries in our survey highlight how local, thematic challenges are shaping sector-specific pressures.
EY-Parthenon Restructuring Pulse Survey
Companies and their stakeholders increasingly turn to more sophisticated, flexible strategies to preserve value and position for recovery.
The EY-Parthenon Restructuring Pulse Survey highlights a growing emphasis on proactive, consensual approaches that balance short-term stability with long-term business transformation. The most widely cited solution in our survey was ‘amend and extend’ debt restructuring. Among a broad range of corporate restructuring tools, this approach dominated in H2 2024 and this looks set to continue in H1 2025. Its continued popularity reflects a strong preference for minimising near-term business disruption whilst providing borrowers and lenders with critical breathing room to stabilise operations. By avoiding more disruptive insolvency proceedings, it allows time to reassess capital structures, align stakeholder interests and preserve value during periods of uncertainty.
Refinancing is also expected to play a leading role in corporate restructuring, as businesses recalibrate their capital structures in response to post-pandemic debt maturities and shifting growth expectations. As companies adapt to rapid changes in their markets, through supply chain diversification, market expansion, or digital transformation they are seeking loan terms that better align with their strategic direction. However, as our respondents noted, the feasibility of refinancing depends heavily on the severity of financial distress and the credibility of turnaround plans.
In H1 2025, existing lenders and shareholders are expected to remain the primary sources of new funding, leveraging their familiarity with the business and vested interests. Third-party capital,such as private equity or distressed funds, if available, often involves longer timelines and greater dilution risk.
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All of this takes place within the context of the persistence of ‘covenant-lite’ lending, which continues to shape the corporate restructuring landscape. Respondents noted that renegotiated terms have become less favourable to lenders, adding complexity to workout scenarios and reinforcing the need for collaborative, forward-looking solutions. This trend is especially pronounced in the UK, where 59% of respondents reported less favourable terms for lenders in the last six months.
Across Europe, there is growing recognition that, amid rapid economic shifts, more companies will require deeper, more decisive action to secure long-term stability. The survey reveals a shift toward operational turnarounds, as businesses and stakeholders increasingly adopt strategies that go beyond financial restructuring, such as divesting or closing non-core operations.
Strategic approaches vary by country, shaped by local economic structures. In Austria and Germany, the focus on operational turnarounds reflects their industrial, export-driven economies, where efficiency and footprint rationalisation are vital amid global supply chain disruptions. In the UK, accelerated M&A is more prominent, supported by a mature private equity market and a service-heavy economy, where consolidation offers rapid synergies. The UK’s flexible corporate governance also enables faster deal-making.
Asset sales and closures are more common in Germany and Spain, where companies are under pressure to shed underperforming units amid margin compression. In Poland, equity injections from existing shareholders are more frequent, reflecting a relationship-driven banking environment and a strong domestic investor base. This approach also supports ownership retention in sectors exposed to geopolitical risk. Spain, meanwhile, shows a strong focus on refinancing, driven by the need to manage legacy debt in tourism and agriculture, still recovering from pandemic-era disruptions.
A special thanks to David Koudela, EY-Parthenon Czech Republic Director, for his support in conducting this survey.
European workout bankers surveyed by EY-Parthenon expect corporate restructuring activity to rise in H1 2025, peaking later in the year, particularly in Western and Central Europe, where industrial sectors are under mounting pressure. 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.
