Financial strain is increasing among companies in western Europe as rising debt levels have left businesses more susceptible to economic shocks, according to a recent report by the Boston Consulting Group (BCG). The analysis, which covered approximately 1,700 publicly traded European firms, highlights a growing need for business transformation across the region.

The report found that 16.2% of companies in western Europe are currently under significant financial pressure, up from 14.3% last year. This stress is most pronounced in Spain and Portugal, where 22% of companies are facing restructuring or urgent transformation needs. France and the DACH region—comprising Germany, Austria, and Switzerland—each have about 10% of companies experiencing heightened financial distress.

BCG’s findings pointed to a 22% rise in net debt relative to earnings before interest, taxes, depreciation, and amortization (EBITDA) between 2022 and 2025. Nearly one-third of the analysed companies began 2026 with debt-to-EBITDA ratios exceeding three times, a threshold identified by BCG as indicative of financial stress. Many firms continue to grapple with high indebtedness after accumulating cheap debt during the COVID-19 pandemic, a factor that has constrained their ability to absorb rising energy costs, supply chain disruptions, and persistently elevated interest rates.

“European companies have emerged from five difficult years with more debt and less capacity to withstand setbacks,” said Tobias Wens, a BCG managing director and co-author of the report. He cautioned that businesses would have fewer options to manage unforeseen challenges if their current plans do not come to fruition or if additional economic shocks occur.

The report singled out the property sector as particularly vulnerable. Approximately 62% of real estate firms are now under transformation pressure, a sharp increase from 12% in 2025. Economic uncertainty and higher long-term interest rates have dampened valuations, deal activity, and buyer affordability in the property market.

In addition, around 28% of automotive companies are facing financial strain due to weak demand, industry overcapacity, the costs associated with shifting to electric vehicles, and intensifying competition from China. Media and publishing firms are also experiencing heightened stress; about 20% are grappling with shifting consumer habits and advertising revenues as audiences move towards online platforms and AI-driven content discovery.

The report underscores the increasing urgency for European businesses to adapt amid a challenging economic environment characterized by elevated leverage and persistent financial headwinds.