The British Council has made net losses of £184m since the start of the Covid-19 pandemic, as the charity’s trustees have warned the government that it remains at “high risk of insolvency”.
Today, the National Audit Office (NAO) published the findings of its investigation into the charity’s financial sustainability.
The report shows that the pandemic had “a large negative impact” on the council’s commercial revenues, forcing it to scale back its operations worldwide.
In 2020-21, the charity, which operated in 96 countries as of March 2025, recorded a 28% drop in total income to £925m and a net loss of £91m.
As a result, its free reserves have substantially decreased, from £87m in 2019-20 to -£111m by 2024-25.
To help with the financial impact of Covid-19, in July 2020, the Foreign, Commonwealth & Development Office (FCDO) gave the charity an initial short-term loan of £60m.
The loan, which has since been amended and extended several times, is currently worth £197m and in place until September 2027.
The report notes that the council has not made any capital repayments on the loan since April 2024 and “sees no viable path for it being able to repay the loan in the foreseeable future”.
Further redundancies planned
Most of the charity’s income – £1.01bn in 2024-25 – comes from commercial activities, with 69% coming from its English teaching and exams business last year.
The charity also receives grant-in-aid funding from the FCDO, its sponsor, making up around 15% of its overall income.
To recover its position following Covid-19, the council cut 2,110 full-time equivalent (FTE) staff between April 2021 and January this year, which should save £179m by 2025-26.
Despite this, its income has not recovered, and the charity is still making a loss. In 2024-25, it made a net loss of £40.1m, with a total expenditure of £1.05bn.
The report says the charity’s turnaround plan, which aims to deliver £306m in net benefits by 2029-30, includes office closures in 11 countries, pending ministerial and FCDO approval.
Most of the savings are expected to come from restructuring and efficiency measures (£172m), including further redundancies of around a quarter of the charity’s workforce (2,209 FTEs).
However, the report says that even if the charity delivered on the turnaround plan’s improvements, it would still generate net operating deficits until 2029-30, with its free reserves falling to -£184m.
Increasingly ‘precarious’ financial situation
The NAO said negotiations between the FCDO and council are in their “final stages”, with both looking at an agreement that will lead to full repayment of the loan within 15 years.
It urged them to settle the charity’s future role and agree on “a sustainable plan for recovering the money originally lent”.
Geoffrey Clifton-Brown, chair of the Public Accounts Committee, said: “The British Council plays a vital role in promoting the UK and strengthening its soft power overseas, but today’s NAO report highlights its deeply concerning and untenable financial position.
“Since the pandemic, the British Council has suffered considerable financial losses, leaving it heavily reliant on a loan from the FCDO which it currently cannot afford to repay.
“Despite cutting its spending, the British Council’s financial situation is increasingly precarious.
“It isn’t sustainable for the FCDO and the British Council to continuously extend the loan year after year, rather than agree on a lasting solution; they must do so as soon as possible to ensure that the British Council is viable for the long term.”
British Council: ‘We’re taking all necessary steps’
A spokesperson for the British Council told Civil Society: “We welcome the NAO’s report which clearly sets out the challenges we’ve faced since our operations around the world were hit hard by the Covid-19 pandemic.
“We’re taking all necessary steps to significantly cut costs and grow our revenue, ensuring that 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 key issue of our £197m government loan, which was awarded on commercial terms, with interest at market rates.
“We look forward to agreeing on a solution to the loan, enabling us to continue with our mission to support peace and prosperity for the people of the UK and millions of people across the globe.”
