"Initialize repository with a README" is ignored

Summary

When creating a new repository with developer permissions on gitlab.com and ticking "Initialize repository with a README" the repo is not initialised. This is similar to #7583 (closed) but to me looks like a separate issue.

Steps to reproduce

Create a new repo and tick "Initialize repository with a README".

What is the current bug behavior?

Repo will be created but empty.

What is the expected correct behavior?

Repo will be created and contain a README on master branch

Output of checks

This bug happens on GitLab.com

Possible fixes

(If you can, link to the line of code that might be responsible for the problem)