(MENAFN) Britain is being warned it could face an economic breakdown reminiscent of the severe 1976 crash, as spiraling borrowing costs and record debt cast doubt over Labour’s fiscal strategy, according to reports.

Nearly fifty years ago, a Labour government was forced to request an emergency loan from the International Monetary Fund after uncontrolled deficits and runaway inflation left the economy in crisis. That bailout led to sweeping spending reductions and contributed to Labour’s loss of power soon after.

Today, Chancellor Rachel Reeves is under similar pressure, with forecasts pointing to a £50 billion ($68 billion) shortfall in the nation’s finances, while interest payments on debt are expected to surpass £111 billion. The UK’s debt has climbed beyond 96% of GDP, reaching about £2.7 trillion—one of the heaviest debt burdens among advanced economies. At the same time, borrowing costs have jumped, with yields on 30-year bonds surpassing 5.5%, higher than both the US and Greece.

Jagjit Chadha, former head of a leading economic research institute, said the current situation is “as perilous as the period leading up to the IMF loan of 1976,” warning that the country could struggle to cover welfare and pension payments.

Andrew Sentance, a former Bank of England policymaker, argued that Reeves was “on course to deliver a [former UK Chancellor Denis] Healey 1976-style crisis in late 2025 or 26,” accusing the Labour government of driving inflation through increased taxation, borrowing, and spending.

These concerns come just weeks before Reeves unveils her first autumn budget, where she is expected to announce additional tax hikes to plug the financial gap. Critics warn such measures could worsen the downturn. Meanwhile, Labour faces growing economic and political headwinds, with declining public support.

Reform UK leader Nigel Farage claimed it was “the 1970s all over again,” while Conservative leader Kemi Badenoch blamed soaring borrowing costs on Labour’s “economic mismanagement.”

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