Blain’s Morning Porridge August 27^th 2025: The UK and IMF – Speculative Hype Presented as Irrefutable Fact

“I read the Torygraph each morning to know what the enemy is thinking.”

The UK’s Torygraph Newspaper excelled itself over the weekend, publishing claims the UK is bust and seeking an IMF bailout. Their readership loved it as proof positive the UK is doomed and how terrible the new government is. It undermined the Gilts market, and raised substantial global investor fears over the investibility of the UK. The story was utterly unfounded.

On Sunday Morning the UK newspaper, the Torygraph, published a remarkable front page rant: “Britain “heading towards IMF Bailout.” It was a malignant article of speculative hype presented as irrefutable fact. The paper cited a leading right-wing economist warning the UK economy is at risk of imminent “collapse”, and one of the paper’s own columnists who put the frighteners on the paper’s aging readership, telling them the UK “will not be able to meet pensions payments.”

Was it a fair and insightful summation of the reality facing UK economy, or was it a ham-fisted attempt to undermine political and market confidence? The latter.

Like all great lies, there is a kernal of truth in the tale the Torygraph would have us believe. The UK economy faces substantial headwinds, and one critical indication of these is the sustainability of the Gilts market. The new Labour government has not shown it has any imaginative solutions to the crisis – sticking rigidly to the rules to try and balance competing spending demands.

As I keep reminding readers, the critical indicator for any financially sovereign economy is the Government Bond yield. It is part of what I term The Virtuous Sovereign Trinity:

• A stable currency
• A sustainable bond market
• Political Competency

If anyone of them wobbles, then crisis will likely follow.

All western economies have seen the yields of long-dated bonds rise on the back of rising inflationary expectations – yield curves have steepened. And, it’s a fact the UK yields are higher than European yields. (Clue as to why that might be: The Bank of England’s base rate is 4%. The ECB’s base rate is 2%. Europe and the UK are very different economies with different currencies. Do you see how that might explain why Greek 10-year bond yields are 3.43% when the UK’s 10-year yield is 4.73%? France, since you ask is 3.5% – higher than Greece! That is a sign of doubts as to the political competency of the French economy.)

I read the Torygraph every morning – but I must have become desensitised to its’ incessant stream of anti-UK nonsense. I read the piece, shook my head, and dismissed it as arrant nonsense. I filed it as yet another effort to undermine the current govt by weakening market sentiment. The Torygraph has a clear anti-government agenda, which it addresses with a stream of scary tush and nonsense. That’s why it’s one of the best read papers in the UK – its elderly readership are overwhelmingly conservative and love to be thrilled and scared by tales of socialist incompetence.

I underestimated the articles effect. The rest of the market noticed.

Yesterday I fielded half-a-dozen calls from US clients and readers of the Porridge wanting to know how the UK’s financial position had become so perilous? Should they dump UK assets? The article was reported as gospel truth in US media and run in bold headlines across right-wing financial commentariat sites such as Zero-hedge. The Torygraph’s highly speculative article became a matter of market fact in very little time.

Gilts yields spiked higher when the market reopened on Tuesday morning (following the bank holiday). A well-followed US bond commentator put out a piece on Monday confirming the UK needs an IMF bailout because of the unsustainability of its national finances. He cited demographics, the welfare state, energy costs, productivity, and the UK’s budget and trade deficits. These are all problems – suffered by just about every Western Capitalist nation.

That other stalwart of Fleet Street (the street of shame that once hosted all the UK newspapers), The Times of London, put out a rebuttal piece to the Torygraph’s claptrap. The excellent David Smith, editor of the business section, noted right-wing rumours of an IMF bailout are common-place. He suggested France looks a more likely candidate for an IMF rescue – and sure enough, the French finance minister said it publically y’day. It looks inevitable the French government will collapse next week.

Within the London financial community, including many City Economists and Gilts Traders, there is a natural tendency to vote Conservative. That’s kind of understandable – finance has given them good post-private school careers and as the nation struggles with the legacy of some 80 years of post WW2 decline, they are concerned with how that may impact them.

However, many have lost the plot and focus since last year’s election, unable to get past the fact the UK voted overwhelmingly to chuck out the Tories in 2025. They remain convinced Labour are unable to run the economy. They offer proofs such as the constant demeaning of Chancellor Reeves as Rachel from accounts, or presenting the antics of vice premier Angela Raynor enjoying a vape on a sun-bed as proof positive she is unacceptable. Why? (I’ve done much worse on my paddleboard…..)

A very good friend, who writes an interesting market take, wrote yesterday hailing the Torygraph piece as marvellous market insight. He said “Rachel Reeves plans lie in Ruins.” He put the blame for the current fiscal black hole in the UK’s account squarely on her doorstep, blaming her for not cutting taxes, paying off the unions (who demand more), crushing the middle classes, destroying farmers, while warning of massive tax raids on our pensions and salaries. Yada, yada, yada…

He may be right – the UK faces major financial challenges – but the nations finances have not tumbled into disrepair in the twelve-month since July 2024. They were in long-term decline right through the last administration – but, as he will no doubt write, that’s exactly what he’d expect an outright communist like myself to say! (I consider myself middle of the road.)

The real issue is why the European economies, including the UK, have so underperformed the USA in recent decades.

That is a massive question – which would require a book to answer. But some of the issues would include how much faster the USA got its financial economy working again after the Global Financial Crisis of 2008, and how QE fuelled financial asset prices. Higher stock markets create business and consumer confidence. The malign influence of over-regulation and bureaucracy stifling innovation in Europe is another factor.

And Europe is at a later stage in the inevitable economic cycle of rise and fall. Our nations were ripped apart by the World Wars of the last century. The UK fought longest and was effectively bankrupted – while the USA was untouched and emerged the global creditor from the profits of being the Arsenal of Democracy . The rebuild – with Marshal Plan money (Thank you America before JD Vance takes umbrage) enabled industrial reconstruction, but did not cure the exhaustion of long-established societies that had been riven to the core. Much of the UK’s chronically bad infrastructure – water, rail, roads and housing stock is still Pre-World War 2. There was never the money to upgrade. History shows empires rise and fall. They do not rise, fall then rise again.

Over the past decade I’ve watched with increasing concern at how polarised UK politics has become – take note of how that has gone for the USA. The collision between politics and markets has become increasingly fraught and bitter – fuelled by journalists presenting political rote rather than reporting fact.

It’s now apparently completely acceptable for Tory supporting papers to trash the economy, and Gilts, the UK’s domestic bond market. It has killed political dialogue – with an utterly straight face Tory Leader Kemi Badenough lambasts Chancellor Rachel Reeves for failure – despite the clear trajectory of the UK’s multiple financial problems that go back for years, to even before her own party was in power. The Blitzkrieg propaganda war of attacks on the government, is hurting the economy. Even more worrying are the political attempts to undermine government.

Yesterday I deliberately used the following line:  “the increasingly “manufactured” political tension in the UK over immigration.” Sure enough I got some furious responses telling me how illegal immigration will destroy the UK.

The aim of opposition is to undermine the current govt to become the next on. It suits the opposition agenda to demonstrate political failure – and to manipulate an issue into a crisis. One of the many questions I get asked by American readers is “just how bad is Muslim control of the UK?”, an impression they’ve garnered from reading extreme perspectives on X and elsewhere.

Here’s an idea that will set the bullets flying… I accept bad people are using the channel rubber boat ferry service – Albanian thugs etc – to enter the UK illegally. However, most of the young men are economic migrants in search of better lives. They demonstrate considerable gumption in getting themselves here – paying substantial sums and running large risks. They want better lives and to get wealthy – a basic human goal.

Perhaps we should be using them? If they pass initial screening (to weed out terrorists, criminals, psychotics and religious nutters), let them work – for us! Illegals who get here and have skills get to spend 5 years working for the state in the armed forces, in service, or in workforce placements. If they pass the test and succeed they get a route to citizenship. If they fail, instant deportation.

Why not?

Out of time, and back to the day job…

Bill Blain

CEO – Windshift Capital

Author – The Morning Porridge

Partner – Shard Capital