Concerns over global economic growth and tariffs, as well as continuing weakness in some end-markets, including automotive and construction, will lead to lower order intakes for European non-investment-grade diversified industrial manufacturers in 1H25, Fitch Ratings says. However, good liquidity and solid financial metrics among most high-yield issuers should sustain ratings in our portfolio.
Book-to-bill ratios are likely to decline below 1.0x in 1H25 before gradually recovering in 2H25, according to our EMEA High-Yield Diversified Industrials and Capital Goods — Relative Credit Analysis. Weaker order flows will translate into slow revenue growth for the full year 2025.
Accelerated economic decoupling between the US and China is prompting companies to reconsider global supply chains, shifting towards ‘friend-shoring’ and ‘near-shoring’ strategies. This involves relocating production closer to home or to politically aligned countries to enhance supply chain resilience.
Relocating production capacity from Europe to the US to counteract tariffs is not a quick solution as it requires substantial investment in plant and personnel. Many European companies are exposed to new US tariffs under the Trump administration. Although a significant proportion of US sales by European industrial companies comes from local facilities, considerable exports still flow from Europe to the US.
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