Conservative leader Kemi Badenoch has warned that the UK could face a repeat of the 1976 sterling crisis if the government fails to deliver a credible growth strategy.
Speaking on BBC Newsnight, Badenoch said she was “really worried” Britain might be forced to go “cap in hand” to the International Monetary Fund unless urgent measures are taken to boost the economy and rein in welfare spending.
“There is a crisis in bond markets. Borrowing costs have hit a 27-year high and we are simply not growing enough,” she said. “If Labour does not come up with a serious plan, the UK risks an IMF bailout.”
Her comments invoked the memory of 1976, when Labour Prime Minister Jim Callaghan was forced to seek a $3.9 billion loan from the IMF after a collapse in sterling. That event has long been viewed as a turning point in Britain’s post-war economic credibility.
Economists remain divided on whether history could repeat itself. Former Bank of England policymaker Andrew Sentance recently wrote of “eerie parallels” with the 1970s but argued the UK may not ultimately need IMF intervention. While some on the right have raised alarms, others dismiss the prospect as exaggerated.
Badenoch, however, insisted the warning signs were clear. She pointed to the volatility in gilt markets, where yields on 30-year government bonds have risen sharply before easing last week, and accused the Labour government of failing to present a growth plan.
“They thought things would just work because they are Labour and believe in their own righteousness,” she said. “That is not working. Without a proper growth agenda, we risk ending up at the IMF’s door.”
Badenoch offered to work “in the national interest” with Prime Minister Sir Keir Starmer, but set conditions. The Conservatives want the government to keep the two-child benefit cap and cut welfare spending. “This is not a blank cheque,” she said, adding that agreement on reforms would unlock Conservative support.
Labour swiftly dismissed her intervention. A party source said: “Kemi Badenoch’s Conservatives crashed the economy and sent mortgages spiralling. The idea that she can now lecture others is astonishing. The Tories haven’t listened and they haven’t learned.”
For now, bond markets remain volatile, and while economists say the UK is unlikely to require an IMF bailout, Badenoch’s warning underscores the political pressure on Labour to balance public finances and spur growth.
