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Next year could be the worst the UK economy will face in the current financial crisis as inflation becomes deflation, according to a Defaqto analysts.

A report this week on the global multi-manager section warns UK inflation is likely to reverse in the coming 12 months leading to recession.

Blending Talents is the eighth part of a quarterly series of investment guides for the multi-manager sector published by the personal finance experts.

Source: Blending Talents Defaqto, from a sample of 66 out 149 total multi-manager funds

Michael Baxter, chief economist of Defaqto, warned in the 88-page document, that 2009 "appears to be the year of maximum danger for the UK" and multi-managers should take this into account in planning investment strategies.

He claimed recession would force down oil and food prices worldwide while the credit crunch hits incomes, property and stock markets.

He said: "The likely slowdown in the growth of international trade as the world’s largest importer goes close to recession, is also likely to lead to a fall in demand for oil as demand from the sectors that transport goods overseas decelerates. These factors could lead to a fall in the price of oil over the next few years.

"The price of food is likely to fall as producers adjust to new conditions, invest more in machinery, and cultivate more land.

"For these reasons, two of the key factors that have created inflationary pressure in recent years could go into reverse.

"At the same time we have seen falling asset prices – both shares and property. This phenomenon is normally associated with periods of deflation, for example the 1930s in the US and Japan’s lost decade.

"Finally, the credit crunch will result in less money in circulation. Capital Economics published a report suggesting the amount of cash held on deposit by companies is falling rapidly.

"For all the above reasons, it seems that by the tail end of 2009, deflation, rather than inflation, will become the key concern of economists."

Fraser Donaldson, co-author of the report, said the research was designed to "help in understanding, researching and justifying multi-manager selections" and "keep advisers informed of market activity over the previous quarter".