Britain is set to be hit by the biggest recession out of all the world’s largest economies, according to analysts at insurer Allianz Trade. The UK’s economy is predicted to shrink by 0.9 percent in 2023 while business insolvencies will rise by 15 percent.
Germany will see a 0.7 percent shrinkage, France’s economy will slump by 0.4 percent and the US is expected to see a decline of 0.3 percent.
The analysis also warned that companies across the UK and Europe will see a “massive profitability shock” as the cost of soaring energy bills will not be fully offset by governmental support.
Inflation is also expected to remain “uncomfortably high” although rising rates will slow from nine percent in 2022 to 7.5 percent this year.
A global recession is forecast to hit in 2023, with worldwide growth of just 1.4 percent this year, down from 2.9 percent last year, before rebounding to 2.8 percent in 2024.
Maxime Darmet, senior economist at Allianz Trade, said global trade would “continue to slow” with the manufacturing sector especially impacted due to low demand.
Kristalina Georgieva, managing director of the International Monetary Fund (IMF), previously predicted a third of the world economy would be in recession this year.
Ms Georgieva warned the US, EU and Chinese economies were all slowing simultaneously, with the growing Covid outbreak in China affecting economic growth negatively across the world.
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The UK is forecast to be hit hardest out of all the G7 economies, with London School of Economies professor Ricardo Reis blaming “an energy shock as bad as Europe’s, an inflation problem . . . as bad as the US and a unique problem of lack of labour supply from the combination of Brexit and the NHS crisis”.
Even though 2024 is expected to be better, Britain will still struggle to recover due to fundamental policy “mistakes” coming from factors such as weak investment and the impact of Brexit.
Cambridge University professor Diane Coyle said that improving relations with the EU was essential to bettering standards of living for the UK population.