Kemi Badenoch, the frontrunner to be the next Conservative party leader, has been accused of creating an intimidating atmosphere in the government department she used to run, with some colleagues describing it as toxic, the Guardian can reveal.

At least three officials found her behaviour so traumatising that they felt they had no other choice but to leave, sources claimed.

Morale was said to be so low in the Department for Business and Trade last year that senior officials thought it necessary to address concerns about the working culture during an official “town hall” meeting. This was attended by about 70 staff in person and online on 13 December 2023.

Sources alleged that at least three senior officials in Badenoch’s private office felt in effect pushed out by what they claimed was “bullying and traumatising” behaviour by Badenoch during the 17 months she ran the department before the Conservatives lost the election. Badenoch has flatly denied behaving in that way.

Others who worked closely with the former business secretary, who is the bookmakers’ favourite to succeed Rishi Sunak, have told the Guardian they struggled with her behaviour and the atmosphere it created.

They were said to have “dreaded” meetings, as they claimed individuals were regularly left feeling humiliated by Badenoch and reduced to tears afterwards on a handful of occasions.

One departmental insider said it was normal for people to “lose their rag sometimes”, but claimed that Badenoch’s treatment could often come across as “sustained and personal”.

A spokesperson for Badenoch said the allegations were “completely false and a flagrant smear”. They confirmed that the business secretary “had to let go of” some senior officials and suggested she had found examples of “underperformance, complaints and bad behaviour” within her department. They added that she has “high standards and expectations”.

During Badenoch’s time as business secretary, other ministers in the department are understood to have “checked in” on the wellbeing of staff, while officials tried to ensure that colleagues who had allegedly been “targeted” by Badenoch were not left alone with her in case she upset them.

The allegations were never the subject of an official investigation, but sources said officials had spoken privately to the department’s permanent secretary, Gareth Davies, about Badenoch’s alleged behaviour over the last year.

The then Cabinet Office’s propriety and ethics team, and at least one senior aide to Sunak in No 10, are understood to have been told informally about one allegation. Investigations are opened only if a formal complaint is made, and none was in this case.

There is no suggestion the former prime minister was aware of the specific allegations. The Cabinet Office and a spokesperson for Sunak declined to comment.

Badenoch, who is now the shadow housing, communities and local government secretary, entered the Conservative leadership race on Sunday.

“If I have the privilege to serve, we will speak the truth again,” she said. “That is why today my campaign is launching with an explicit focus on renewing our party for 2030 – the first full year we can be back in government and the first year of a new decade.”

When Sunak became prime minister in 2022, he promised a government of “integrity, professionalism, and accountability at every level”. The ministerial code states that ministers must maintain high standards of behaviour and that bullying will not be tolerated.

Sources alleged the atmosphere in the business secretary’s private office was dependent on her “mercurial” moods and was “often toxic and intimidating”. They said that while Badenoch was “professional and engaging” with senior civil servants in other parts of the department, she could be difficult to work for directly.

They suggested she had “favourites” as well as people she appeared to “single out”. Two sources claimed her behaviour could also be “passive-aggressive”.

Another source predicted Badenoch would respond to the allegations by attacking “woke” civil servants, suggesting they were “not up to the job”, rather than addressing her own alleged conduct.

The Guardian understands that one of the three senior officials told colleagues about several alleged incidents, including being “berated” by Badenoch for 30 minutes in a government car, which left them feeling “useless and pointless”.

Witnesses described what they called “sustained bullying” of the official, including belittling remarks they said were “unbearable for all of us”. They claimed the individual began stammering in Badenoch’s presence.

As a result, the official began the formal process of being signed off sick, claiming to colleagues they were being “bullied” by Badenoch, sources said. They were allegedly sacked 24 hours later, with the minister citing a “breakdown in relationship”.

One staff member who left their role did so after being repeatedly “berated and demeaned” by Badenoch, a source close to the individual said, adding that during their final few months in the post they were left shaking or on the verge of tears on several occasions.

A third senior official moved to a new role after feeling “constantly undermined and set up to fail” by the minister, sources said. It is understood that two of the senior officials left of their own accord.

The staff meeting last December was organised by senior officials in response to the findings about the department in the annual internal civil service survey. However, they were also understood to have concerns about poor morale among private office staff and the working culture fostered by the business secretary over the course of the previous year.

The survey findings, which have not been made public, were that 9% of respondents in the private office directorate said they had experienced bullying or harassment. This is the same level as across the Department for Business and Trade as a whole, and marginally higher than the civil service average of 8%.

According to the survey, bullying can be characterised as “offensive, intimidating, malicious or insulting behaviour” as well as a misuse of power in ways that “undermine, humiliate, denigrate or injure” the recipient.

At the meeting, staff were shown slides, seen by the Guardian, listing “negatives” reported by officials to senior management in October 2023. These included “management not listening” to their concerns, “lack of respect”, “more anxiety and unhappiness than the previous year” and a failure to “lead by example”.

A department spokesperson said: “We cannot comment on individual HR matters. However, there have never been any formal complaints or investigations into the previous secretary of state’s conduct at this department.

“It is common for government departments to seek the views of civil servants and to discuss the results of those surveys in routine meetings with staff. We do not tolerate abuse or bullying of any kind.”

When Badenoch was still in post as business secretary, a spokesperson for her said: “These allegations are completely false and a flagrant smear … It is the case that Kemi had to let go of some senior people… due to underperformance, complaints and bad behaviour.”

Approached again this week, a spokesperson for Badenoch incorrectly said the Guardian had only one source for the allegations, who had themselves been accused of bullying.

“The Guardian has sat for months on these anonymous smears from a disgruntled ex-staffer, who was accused of bullying behaviour themselves, because they are more interested in doing Labour’s work undermining Kemi’s campaign to be leader of the Conservative party, than they are in trying to establish the facts.

“As the business department makes clear, there were never any complaints or investigations into Kemi, which makes these smears utterly baseless. Kemi has high standards and expectations, and she has cultivated high-performing civil service teams who enjoy working with her.”

Nikki da Costa, a former policy fellow for Badenoch who was at the business department for regular meetings, approached the Guardian to say she had a positive experience of working with the minister. “My impression was of someone with high standards but who genuinely cares about the team she works with. I wasn’t aware of any concerns and no issues were raised with me,” she said.