Britain to suffer the deepest recession of all the world’s largest economies in 2023

Britain will suffer the deepest recession among the world’s largest economies in 2023 as it is battered by rising energy bills, high interest rates and a rise in failing businesses.

Analysts at insurer Allianz Trade predicted the UK economy will shrink by 0.9 per cent this year compared with a 0.7 per cent decline in Germany, a 0.4 per cent slump in France and a 0.3 per cent shrinkage for the US.

The report also warned firms across Britain and Europe would suffer a ‘massive profitability shock’ in the coming months from rising energy bills which would not be fully offset by government support measures.

As a result, Allianz predicted business insolvencies in the UK would rise by 15 per cent in 2023 to 27,100 as firms buckle under the weight of higher costs.

Meanwhile, analysts expected inflation to remain ‘uncomfortably high’ over the coming year, although the annual pace of price rises in Britain would cool to 7.5 per cent in 2023 from 9 per cent last year.

Overall, Allianz concluded the global economy was ‘still headed towards a recession’ in the coming months, predicting worldwide growth of just 1.4 per cent for 2023, down from 2.9 per cent last year, before rebounding to 2.8 per cent in 2024.

Maxime Darmet, senior economist at Allianz Trade, said global trade would ‘continue to slow’ with the manufacturing sector particularly hard hit by lower demand and some companies trying to lower their stock levels due to previous oversupply.

The conclusion echoes a warning from Kristalina Georgieva, managing director of the International Monetary Fund (IMF), who predicted a third of the world economy will be in recession this year.

Ms Georgieva warned the US, EU and Chinese economies were all slowing simultaneously and that the growing Covid outbreak in China would slow economic activity across the globe.

The comments came after the IMF cut its 2023 outlook for growth in October, saying the war in Ukraine, inflation and rising interest rates would drag on the world economy.