The German government has slashed its economic forecast, warning that output would shrink 0.4 per cent this year, while admitting it must overcome “major structural challenges” including a “desperate” shortage of workers.

Robert Habeck, economy minister and vice-chancellor, blamed the grim outlook for Europe’s largest economy on the energy crisis triggered by Russia’s full-scale invasion of Ukraine, a sharp rise in interest rates to tackle inflation and slowing global trade, while calling for an increase in skilled immigrants to bolster its ageing workforce.

“Companies are desperately looking for workers, craft businesses have to reject orders, and shops and restaurants have to limit their opening hours,” he said on Wednesday. “And it’s not just about skilled workers — we notice in every possible corner that we simply lack workers.”