'Frankly doomed': UK economy so bad it could need IMF bailout, warns top investor

One of Britain's top investors has warned that the UK economy is "frankly doomed" because of the "completely hopeless" Brexit deal.

Guy Hands, founder of private equity giant Terra Firma and a long-time Conservative Party supporter, said the situation was so serious the UK could need a financial bailout from the International Monetary Fund (IMF) if the next prime minister fails to renegotiate Brexit.

His comments came as former chancellor Rishi Sunak closes in on becoming the new prime minister after the withdrawal of Boris Johnson from the Tory leadership race on Sunday night.

His only remaining rival, Penny Mordaunt, is seeking to gain the support of at least 100 of her party's MPs by Monday's 2pm deadline to force a vote among its membership.

Hands told BBC Radio's Today programme on Monday that the UK is now "on a path to be the sick man of Europe" because of the way Brexit was negotiated.

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He warned that the Conservative Party has got to take ownership of the mistake of Brexit and "move on from fighting its own internal wars".

"When they did Brexit they had a dream of a low-tax, low-benefit economy. Truss – to be fair to her – tried it and it’s clearly something that is not acceptable to the British people," he said.

Hands added: "The Brexit that was done is completely hopeless and will only drive Britain into a disastrous economic state.”

He said the Conservative Party had to “own up to the mistake they made in how they negotiated Brexit”.

He said there is a "possibility of turning around the economy" under the leadership of someone with the “intellectual capability to re-negotiate Brexit”.

Without that, Hands said, the economy “is frankly doomed”.

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If things continue, the result will be “steadily increasing taxes, steadily reducing benefits and social services, higher interest rates and eventually the need for a bailout from the IMF like we were in the '70s,” he warned.

In 1976, prime minister James Callaghan's Labour government borrowed $3.9bn from the IMF to maintain the value of sterling, the largest ever loan requested from the fund at the time.

Hands also spoke about the "increasing levels of poverty in the UK".

He said: "It's poverty that's moving up the economic level, it is now middle class people who will not be able to pay their mortgages when they're reset, who are finding it difficult to make ends meet.

"It will move across the whole of society."