July 6, 2026

THE A&M DISTRESS ALERT

The latest A&M Distress Alert (ADA) indicates that financial distress among European corporates reached a four-year high in 2025, driven primarily by earnings weakness. Given that these figures predate the supply chain and energy pressures from the conflict in Iran, we expect that distress will further increase in the next 18 to 24 months.

Distress has risen in 10 of 12 sectors and across nearly all nine markets covered by the analysis, suggesting distress has widened beyond pockets of sector-specific weakness.

The outbreak of war in Iran introduced cost and once again severe supply chain pressures that continue to filter through to earnings and the wider economy. A ceasefire has since been announced, but economists caution that the deal remains fragile and the economic fallout far from over.

For European corporates, the picture remains deeply uncertain. The European Central Bank has raised interest rates for the first time since 2023 in response to surging inflation caused by the war. Consumer confidence, already eroded by years of cost-of-living pressure, has also taken a hit, raising the prospect of lower sales volumes and more margin pressure.

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