Europe will be struck by an even larger wave of debt defaults in the next downturn compared to the financial crisis after a surge in junk-rated companies, Moody’s has predicted.

The credit ratings agency warned that the proportion of B3-rated companies, those graded as “speculative” quality, has doubled in Europe over just three years. The deterioration means the region will see “a much larger number of downgrades and defaults during the next cyclical downturn compared with the crisis in 2008-09”, Moody’s said.

Egor Nikishin, an analyst at Moody’s, said a “less benign part” of the economic cycle would raise doubts about the companies' debt loads and their ability to generate cash.

A decade of ultra-low interest rates and investors being forced to hunt for stronger returns has led to skyrocketing debt levels, particularly for companies.

Global debt is on course to hit $255 trillion (£197 trillion) by the end of 2019 after already hitting a record high, new research by the Institute of International Finance has revealed.