One in six companies in western Europe faces financial strain as rising leverage increases vulnerability to economic shocks, according to Boston Consulting Group. The pressure is most acute in Spain and Portugal, where 22% of companies require business transformation. Across Europe, transformation pressure rose to 16.2% from 14.3% last year.

France and the DACH region, encompassing Germany, Austria, and Switzerland, report the highest percentage of businesses facing sharper stress at 10% each. Net-debt-to-Ebitda ratios, a key gauge of indebtedness, increased 22% between 2022 and 2025. Almost a third of companies began 2026 with ratios above 3 times, the threshold BCG defines as financial stress.

Many borrowers struggle to de-leverage after pandemic-era debt accumulation. This leaves them less able to weather surging energy costs, trade disruption, and higher-for-longer 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.

If business plans do not materialize or there is another shock, companies will have fewer options than they did a few years ago. Property firms stand out, with about 62% under pressure to transform, compared with 12% previously. Economic uncertainty and higher long-term rates have weighed on valuations and dealmaking.

About 28% of automotive companies face restructuring pressure amid weak demand, overcapacity, electric vehicle shift costs, and growing China competition. A fifth of media and publishing companies see acute stress as audiences and advertising move online and AI-mediated discovery grows.