In 1936 the Conservative government feared the spread of communism from the Soviet Union to the rest of Europe. Stanley Baldwin, the British prime minister, shared this concern and was fairly sympathetic to the military uprising in Spain against the left-wing Popular Front government. Leon Blum, the prime minister of the Popular Front government in France, initially agreed to send aircraft and artillery to help the Republican Army in Spain. However, after coming under pressure from Stanley Baldwin and Anthony Eden in Britain, and more right-wing members of his own cabinet, he changed his mind.

Baldwin and Blum now called for all countries in Europe not to intervene in the Spanish Civil War. In September 1936 a Non-Intervention Agreement was drawn-up and signed by 27 countries including Germany, Britain, France, the Soviet Union and Italy. The Labour Party originally supported the government's non-intervention policy. However, when it became clear that Hitler and Mussolini were determined to help the Nationalists win the war, Labour leaders began to call for Britain to supply the Popular Front with military aid. Some members of the party joined the International Brigades and fought for the Republicans in Spain.

The first British volunteer to be killed was Felicia Browne who died in Aragón on 25th August 1936, during an attempt to blow up a rebel munition train. Of the 2,000 British citizens who served with the Republican Army, the majority were members of the Communist Party. Although some notable literary figures volunteered (W. H. Auden, George Orwell, John Cornford, Stephen Spender, Christopher Caudwell), most of the men who went to Spain were from the working-class, including a large number of unemployed miners.

To stop volunteers fighting for the Republicans, the British government announced on 9th January, 1937, that it intended to invoke the Foreign Enlistment Act of 1870. It also passed the Merchant Shipping (Carriage of Munitions to Spain) Act. When Neville Chamberlain replaced Stanley Baldwin as prime minister he continued the policy of nonintervention At the end of 1937 he took the controversial decision to send Sir Robert Hodgson to Burgos to be the British government's link with the Nationalist government.

It has been claimed that the British secret service was involved in the military rebellion in Madrid by Segismundo Casado. Soon afterwards, on 27th February 1939, the British government recognized General Francisco Franco as the new ruler of Spain.