The Department for Business and Trade (DBT) has published its 2024-25 accounts. Gareth Davies, the Comptroller and Auditor General (C&AG), has modified his audit opinion to Parliament in two respects:

  • a limitation of the scope of his true and fair opinion on the provision for the Horizon Shortfall Scheme, as he was unable to obtain sufficient evidence to support the valuation
  • a qualified opinion on regularity, due to the level of suspected fraud identified within the Future Fund

For more details see Basis for qualified opinion on the financial statements and Basis for qualified opinion on regularity.

Here we share highlights from the C&AG’s audit certificate. You can read the full certificate and report on the accounts in context in DBT’s annual report and accounts.

Qualified opinion on financial statements

In my opinion, except for the possible effects of the matters described in the Basis for qualified opinion on the financial statements section below, the financial statements:

  • give a true and fair view of the state of the Department and the Departmental Group’s affairs as at 31 March 2025 and their net expenditure for the year then ended; and
  • have been properly prepared in accordance with the Government Resources and Accounts Act 2000 and HM Treasury directions issued thereunder.

Qualified opinion on regularity

In my opinion, except for the effects of matters described in the Basis for qualified opinion on regularity section below, in all material respects:

  • the Statement of Outturn against Parliamentary Supply properly presents the outturn against voted Parliamentary control totals for the year ended 31 March 2025 and shows that those totals have not been exceeded; and
  • the income and expenditure recorded in the financial statements have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.

Basis for qualified opinion on the financial statements

A provision for the Horizon Shortfall Scheme of £743 million, as shown within Note 15 Provisions, has been included in the Statement of Financial Position for the Department and its Group at 31 March 2025. I have been unable to obtain sufficient appropriate audit evidence over the carrying value of this provision at 31 March 2025, and the accuracy of the related expenditure for the year, due to the Department having obtained insufficient justification from Post Office Limited for the claim volume and claim value estimates submitted by Post Office Limited and used by the Department in the preparation of the provision estimate. Consequently, I have been unable to determine whether any adjustments to these amounts is necessary.

While I have not been able to reliably quantify the impact of this matter as explained below, I consider the impact of these issues to be potentially material in terms of the valuation of these liabilities, and the accuracy of related expenditure.

My assessment of the matters giving rise to qualified opinions

Provision Measurement – Horizon Shortfall Scheme

Matter giving rise to qualification

The Department has recognised a provision of £743m at 31 March 2025 in respect of this commitment to fund Post Office Limited’s Horizon Shortfall Scheme (as disclosed in Note 15 to the financial statements). The Department has additionally recognised £43 million of expected future scheme settlements as accruals because an offer has been made to the claimant and the settlement value is less uncertain (as disclosed in Note 13 to the financial statements).

I qualified my opinion on the Department’s financial statements prepared for the year ended 31 March 2024 because I was unable to obtain sufficient appropriate audit evidence in relation to the provision estimates made for the Horizon Shortfall Scheme to support an unmodified opinion. The Department’s provision for the Horizon Shortfall Scheme continues to be based on estimates made by Post Office Limited of the number of potential additional claims expected under the Horizon Shortfall Scheme and the value at which those claims will be settled. The mail-out to former postmasters, which commenced after the re-opening of the scheme to new applicants and the introduction of the £75,000 Fixed Sum Offer, is ongoing and there is currently no deadline by which individuals must respond. Post Office Limited anticipates that approximately 32% of individuals written to will submit an eligible application under the scheme and that around 90% of those applying will accept the fixed sum offer.

As of May 2025, Post Office Limited has sent letters to approximately 18,500 current and former postmasters, with a further 15,500 letters planned to be sent. Of those who have applied since 28 March 2025, 99% have accepted the fixed sum offer. Significant estimation uncertainty remains and small changes to the claim volume and value assumptions applied could lead to material changes to the value of the provision, as disclosed in Note 15.

Why I was unable to obtain sufficient appropriate evidence

I am of the view that management should have sought better justification from Post Office Limited for its claim volume and value estimates prior to using them in the Department’s financial statements. Given the passage of time since the first letters were sent by Post Office Limited, I expected that that Department’s provision for the year ended 31 March 2025 would have been informed by a more detailed analysis of the progress and results of the mailout exercise. No such analysis has been provided for my review. It is possible, that if performed, such analysis would lead to a materially different estimate and as such I have not been able to obtain sufficient, appropriate evidence to support an unmodified opinion. Management have not provided sufficient basis for key assumptions or evidence of appropriate challenge of the assumptions set by Post Office Limited in valuing the Horizon Shortfall Scheme provision. The key assumptions have a material impact on the provision and therefore I limited the scope of my audit opinion in relation to this Scheme.

Basis for qualified opinion on regularity

The Future Fund is a convertible loan scheme which provided financial support to companies during the COVID-19 pandemic. The scheme opened in May 2020 and closed to new applicants in January 2021, lending £1,137m to 1,190 businesses. At 31 March 2025, there remained 94 companies at the loan stage, and 676 post-conversion equity positions.

As disclosed in the Performance Analysis and Parliamentary Accountability Report sections of the Annual Report, the Department has now categorised 3.9% by volume and 7% (£79.5 million) by value of investments made under the Future Fund scheme as suspected fraud and has referred these cases to relevant authorities. While some future recovery may be possible from this cohort, the investments are being carried at nil value in the Statement of Financial Position.

Losses due to fraud are irregular. Of the cumulative recognised losses of £79.5m due to suspected fraud since the inception of the scheme, £25.9m has been recognised in the financial year ended 31 March 2025. I consider both the losses recognised in the current financial year and the cumulative value of losses to be material and have qualified my regularity opinion in this respect. The Department continues to monitor portfolio companies for indications of any further irregularities.

Key audit matters

Provision Measurement – Post Office Redress Schemes

Refer to Note 15 Provisions

Description of risk

As at 31 March 2025 the Department has recognised:

  • A provision of £859 million in respect of its commitment to fund future settlements under redress schemes administered by Post Office Limited (of which £743 million relates to the Horizon Shortfall Scheme, £83 million relates to the Overturned Conviction Scheme and the remainder relates to the Suspension Remuneration Review and Post Office Process Review Schemes); and
  • Provisions totalling £405 million for future settlements under postmaster redress schemes that, at that date, were delivered by the Department (of which £368 million relates to the Horizon Conviction Redress Scheme and £37 million relates to the Group Litigation Order Scheme).

The amounts recognised as provisions are additional to the £78 million of future scheme settlements that have been recognised as accruals because the Department considers the settlement value more certain.

I qualified my opinion on the Department’s financial statements prepared for the year ended 31 March 2024 because I was unable to obtain sufficient appropriate audit evidence in relation to the provision estimates made for the Horizon Shortfall Scheme and the Horizon Conviction Redress Scheme to support an unmodified opinion.

I have included my assessment of risks relating to the measurement of the provision for the Horizon Shortfall Scheme in the Basis for Qualified Opinion on the Financial Statements section of this certificate. As such, these do not form part of this Key Audit Matter.

On 9 July 2025 the Chair of the Post Office Horizon IT Inquiry published the first volume of his final report which focuses on the human impact of the Horizon scandal and redress. In his report the Chair makes a number of recommendations to ensure ‘full and fair’ compensation is delivered to sub-postmasters affected by the Horizon scandal. HM Government and/or the Department was asked to provide a written response to these recommendations by 10 October 2025. It is possible that the Government’s response to the Inquiry’s recommendations will have a material impact on the value and timing of future payments across the Horizon redress schemes.

The Horizon Conviction Redress Scheme

Within the provision for the Horizon Conviction Redress Scheme there remains uncertainty in respect of the potential number of claimants, the proportion of claimants that will choose the £600,000 Fixed Sum Offer, the value of claims that will be submitted by those expected to request a detailed assessment, and the amount at which these claims will be settled. By 29 August 2025, 484 individuals had applied under the Horizon Conviction Redress Scheme, of which 442 had submitted a full and final claim, of which 427 had settled, with all settled claims being at the Fixed Sum Offer (this includes individuals who had applied under the Overturned Conviction Scheme whose claims are now being managed under the Horizon Conviction Redress Scheme.)

Overturned Conviction and Group Litigation Order Schemes

There remains uncertainty attached to the value of future settlements. Within the Overturned Conviction Scheme this is most so for applicants who have not yet submitted a particularised claim for detailed assessment.

Key observations

I am satisfied that I have obtained sufficient appropriate evidence that the inputs, assumptions and methods used by the Department in its provisions for all Post Office redress schemes other than the Horizon Shortfall Scheme are appropriate in the context of the materiality threshold I have applied in my audit and I am satisfied that these are accurately reflected in the financial statements.

Refer to Note 16 Financial guarantee and loan commitment liabilities as at 31 March 2025 £3.4 billion (2023-24: £6.4 billion)

Description of risk

The Department provides financial guarantees under a number of schemes. The majority of these were launched in response to the COVID-19 pandemic (Bounce Back Loans Scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS) and Recovery Loan Scheme (RLS)). Another (Growth Guarantee Scheme, GGS) was launched after the pandemic, to replace the legacy Enterprise Financial Guarantee Scheme. I consider there to be a significant risk to the measurement of the liability in relation to these 5 schemes. The Department measures the guarantee schemes at the Lifetime Expected Credit Loss (ECL) for each facility.

The Department’s estimated liability for future claims by lenders under the terms of the guarantee schemes continues to be material to the financial statements. Liability measurement is underpinned by significant estimation and judgements by management and its experts. The modelling of ECLs on underlying loans in the schemes is complex due to the large number of data inputs and calculations required to forecast the expected credit loss. Lenders keep key data up to date within the lender portal, this forms the core data used in the model. Some of the other inputs into the ECL are driven by macroeconomic assumptions which are inherently difficult to accurately predict. The Department has applied a material Post Model Adjustment (PMA) to the ECL for the CBILS scheme at 31 March 2025 to account for the probability of a no-loss outcome (cure). The Department applied a similar PMA to the BBLS scheme at 31 March 2024, which is no longer needed due to relevant amendments being made to the underlying model.

When BBLS was introduced, it was subject to an estimated material level of fraud. Management’s estimate of the level of fraud is a key, highly judgemental assumption in the model given the inherent challenges associated with identifying cases of fraud and forming an extrapolated estimate.

Key observations

The valuation of the financial guarantees liability, including assumptions in relation to fraud and error within the schemes, is appropriate. I did not identify any material misstatements.

However, I draw attention to the disclosures made in notes 1.26 and 16 to the financial statements concerning the measurement of the Department’s liability under the Bounce Back Loan guarantee scheme. As described in note 16, the guarantee liability recognised in these financial statements is the present value of the amount that the Department expects to pay to lenders to settle claims made in accordance with scheme rules, which has been measured in accordance with the lifetime expected credit loss requirements of IFRS 9 as adapted by HM Treasury’s Government Financial Reporting Manual (FReM). As note 16 describes, the measurement of the guarantee liability is highly sensitive to assumptions regarding probability of default, and loss given default, with particular sensitivity to assumptions regarding the rate of fraud and error occurrence and associated loss. The Department has taken into account all reasonable and supportable information at the reporting date in estimating the guarantee liability recognised in the financial statements, however, as disclosed in note 16, there are a number of additional risk indicators for which the Department is unable to quantify the impact on the liability due to current data limitations. My opinion is not modified in respect of this matter.

Future Fund – fair value of unlisted equities

Refer to Note 10 Investments and loans in the private sector – Future Fund investments as at 31 March 2025: £610 million (2023-24: £799 million)

Description of risk

The Future Fund was launched in May 2020 to provide support to companies facing financial difficulties due to the COVID-19 pandemic in the form of convertible loan notes (CLNs). At 31 March 2025, the Department held 94 convertible loan notes (CLNs) and 641 post-conversion equity holdings under the scheme. All scheme assets are classified and held by the Department as fair value through profit and loss financial assets. The post-conversion equity, which has an estimated fair value of £599 million, is material to the financial statements.

The fair value measurement of unlisted equity investments is inherently difficult and can involve the application of significant judgement. The department values converted equity positions using a calibrated Price of Recent Investment (PORI) approach in which an Average Price per Share (APPS) is derived from observable market parameters (such as recent funding rounds and conversion events) and then adjusted for market and company specific factors. Whilst some calibration adjustments are applied automatically based on pre-determined parameters, others are based on management judgement and are highly subjective. Calibration adjustments are determined using company specific information that is self-reported by investee companies.

Key observations

I consider the inputs, assumptions and methods used by the Department to estimate the fair value of its post-conversion equity investments within the Future Fund Scheme to be appropriate. I did not identify any material misstatements.

Group fair value measurement of investments in funds

Refer to Note 10 Investments and loans in the private sector as at 31 March 2025 – investment funds: £4.4 billion (31 March 2024: £3.9 billion).

Description of risk

British Business Bank (BBB) holds a significant volume of investments in funds which are classified and measured at fair value through profit and loss for financial reporting purposes (£3.8 billion at 31 March 2025) and are consolidated into the Departmental Group financial statements. The Departmental Group financial statements also consolidate investments in funds including material funds held by Midlands Engine Investments Limited, Northern Powerhouse Investments Limited (Regional Funds), which are administered by BBB but which do not form part of the BBB group.

The valuation of the investments in funds is derived from the Limited Partnership Agreements where each fund manager is required to provide fund valuations for the underlying fund assets at fair value. Some of these are non-coterminous audited valuations or unaudited fund manager valuations which means there is a risk that the valuations do not comply with guidance or that methods, judgements or assumptions used in determining the fair value of fund assets are not appropriate. Fair value measurement of funds holding significant private equities also typically carry higher levels of estimation uncertainty than funds that invest mainly in debt instruments, and that estimation uncertainty can become even higher in periods of economic uncertainty.

Key observations

Based on the evidence I obtained, I found that the investment valuations provided by fund managers are a reliable basis for estimating the fair value of the BBB group and regional funds investments in funds.

While completing my work, I did not identify any material misstatements.

Application of materiality

Departmental group

Materiality: £73 million

Basis for determining materiality: Approximately 1% of Group investment assets of £7,468 million

Rationale for the benchmark applied: The Department is responsible for supporting business to create jobs, opportunities and prosperity across the country. Whilst the form of support to business is varied, the making of investments is the most significant financial intervention at the Departmental Group level. This includes the activities of British Business Bank plc in developing and managing finance programmes which enhance the working of financial markets and improve access to finance for smaller businesses. Overall, due to the public interest in these investments as they are a key policy objective of the Departmental Group, I have judged investment assets to be the area of most interest to users of the Group financial statements.

Department parent

Materiality: £35 million

Rationale for the benchmark applied: Approximately 1.1% of gross expenditure (adjusted for the remeasurement of provisions and financial guarantee liabilities) of £3,207 million

Rationale for the benchmark applied: The Core Department dominates the financial statements for the parent. The Core Department’s main activities result in grant expenditure in line with their policy objective. I have judged that gross expenditure is the area of most interest to users of the financial statements.

Department for Business and Trade Annual Report and Accounts 2024-25

Related work