British Council in ‘precarious financial situation’ after failing to repay £197m Covid loan from government
The British Council has yet to repay a £197 million government loan as it struggles to recover from the Covid-19 pandemic, the public spending watchdog has found.
Six years on, the soft power agency continues to lose money and does not expect to return to profit until 2029/30, according to a National Audit Office (NAO) report published on Wednesday.
The amount, initially kept afloat by a Foreign Office loan of £60 million in 2020, has now reached £197 million.
The NAO clarified that the British Council has only covered interest payments since April 2024 and the capital remains untouched.
NAO chief executive Gareth Davies said the loan arrangements had caused “uncertainty” and raised questions about whether the British Council “can be financially sustainable in the long term”.
The British Council offered to repay the loan with its art collection, which includes works by LS Lowry, Francis Bacon, Tracey Emin and David Hockney.
However, the Government rejected the offer; Government minister Lord Gerard Lemos told colleagues last week that the Treasury “expects the loan to be settled in cash”.
While the loan is due to mature in September 2027 (more than three years after the original maturity date of March 2024), the British Council and the Foreign Office continue to negotiate a plan to turn the organization around and repay the debt within 15 years.
But the NAO report said the current plan, which still needs ministerial approval, could lead to a drastic reduction in the council’s activities, including the layoff of around a quarter of staff and the closure of offices in 11 countries.
Sir Geoffrey Clifton-Brown, chairman of the Commons Public Accounts Committee, said the British Council “plays a vital role in supporting the UK” but described its finances as “deeply worrying and untenable”.
He said: “Despite reducing its spending, the British Council’s financial situation is becoming increasingly precarious.
“It is not sustainable for the FCDO and the British Council to continually extend the loan year after year rather than agreeing on a permanent solution; they need to do this as soon as possible to ensure the British Council’s long-term viability.”
A British Council spokesperson said: “We welcome the NAO report, which clearly sets out the challenges we face as our operations worldwide have been hit hard by the Covid-19 pandemic.
“We are taking all necessary steps to significantly reduce costs and increase our revenue, ensuring the British Council is modern, efficient and able to adapt to changing economic conditions.
“Alongside this, we continue to work with the FCDO to resolve the fundamental issue of market interest rates on our £197 million government loan granted on commercial terms.
“We look forward to agreeing a solution on the loan that will enable us to continue our mission of supporting peace and prosperity for the people of the UK and millions of people around the world.”
