BCG Tracks More Than 2,000 Public European Companies, Identifying the Share Showing Signs of Operational Challenges and Financial Instability
BOSTON—Running a business in Europe over the past few years has been no easy task. Amid challenging economic conditions, insolvency filings among European companies have risen by 11 percentage points since 2022.
Currently, about one in 5 European companies (21%) face strong pressure to transform because of weak operational performance or financial instability—an increase of 7 percentage points over 2023. For some European companies, the pressure is even stronger: roughly one in 15 (7%) have passed the need for a transformation and must now consider severe measures to restructure both their operations and their balance sheet.
These are among the findings of the BCG Transform and Special Situations (TSS) Index 2024 from Boston Consulting Group (BCG) titled “Why One in Five European Companies Needs to Transform.” The Index, which is being released today, examined the operational performance and financial stability of more than 2,000 public companies, with a focus on Austria, France, Germany, Italy, Portugal, Spain, Switzerland, the UK, and the Nordic countries of Denmark, Finland, Norway, and Sweden.
“This is a wake-up call for business leaders in Europe,” says Jochen Schönfelder, the leader of BCG’s Transform practice in Central and Eastern Europe and a coauthor of the article. “Companies that are under extreme pressure cannot afford to wait for macroeconomic tailwinds to improve. Many will need to proactively transform or restructure to remain viable.”
AI Reveals Transformation and Restructuring Topics Are Gaining Momentum
BCG also utilized AI to examine companies’ narratives and surveyed more than 200 senior executives to determine their priorities for the year ahead. The AI-based sentiment analysis found that the frequency of transformation references in company statements and public filings jumped by 24 percentage points from Q1 2023 to Q1 2024. Mentions of restructuring increased by 16 percentage points for the same period.
The Most Impacted Countries and Sectors
Clear warning signs have appeared on the horizon for companies in certain countries. In the Nordics, roughly one in four companies (27%) face transformation pressure. In Germany and Austria, the number jumps to one in three (33%)—significantly above the European average.
Among sectors, the three facing the greatest pressure to change are real estate; technology, media, and telecommunications (TMT); and retail:
- Real estate. This sector is showing the greatest need to change, given high interest rates, significant impairment risk, and high amounts of debt, with nearly 52% of companies facing pressure to transform—a rate that is more than two times higher than any other sector BCG analyzed. Sixteen percent of companies in this sector face restructuring pressure.
- Technology, media, and telecommunications. With inflationary pressures leading both households and enterprise customers to scale back their TMT budgets, 17% of companies in this sector are under pressure to transform and 20% are under pressure to restructure.
- Retail. As consumer confidence remains low, and retailers struggle to justify large networks of physical stores amid the continued shift to e-commerce, 20% of retail companies face transformation pressure and 17% face restructuring pressure.
“Knowing that you need to transform is only the first step,” says Renaud Montupet, a BCG managing director, a coauthor of the article, and the leader of the Special Situations unit for BCG’s Transform practice in Europe. “By taking proactive measures, companies can dramatically change their trajectory. In that way, they still control their destiny.”
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