I have found a question close to mine Reference for candidate unfit for application but not quite the same, and I have followed some of the advice already.
I'm an academic at a UK institute and a current master's student doing a project with me has asked me for a PhD application reference. I said yes when they first spoke to me about wanting to do a PhD (no specific post at that time) as I had no reason not to and they seemed enthusiastic. However, from working with them for over 4 months I don't believe they would be suitable. They have not demonstrated key skills needed, are requiring micromanaging to accomplish tasks, and generally appear quite lazy (and seem to think it's funny). I would not take them as a PhD student - especially seeing as this is their attitude knowing they have asked me for a reference.
I have had a second frank talk with them about PhDs, and that there is a good degree of autonomy in working and self-driven skill learning required for a successful PhD student. But their attitude has not changed since this chat (over a month ago). I could write a very lukewarm reference (which I have done before regarding students who are not outstanding but okay) or just say I can't write one. Although some posts on here are saying there are legal implications of the latter?