Background to the report

The British Council describes itself as the UK’s soft power and cultural relations agency. It aims to promote a wider knowledge of the UK and the English language.

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The COVID-19 pandemic had a large negative impact on the commercial revenues of the British Council with its total income falling by 28% in 2020-21. To help try and ease these financial pressures, HM Treasury and the Foreign, Commonwealth & Development Office (FCDO) agreed to provide a £60 million loan to the British Council in July 2020. The term of the loan, and the amount available to the British Council, have been amended and extended on several occasions since then.

The fixed-term loan is currently worth £197 million and was due to expire in September 2026 but the government has committed to extend this for a further year, with the British Council and FCDO in negotiations over a long-term extension of the loan with revised conditions attached.

The British Council’s position is that it is unable to repay the loan and believes that some form of loan forgiveness or an asset swap (using the British Council’s art collection in place of cash repayment) would be the best way forward. FCDO and HM Treasury want to find a solution that enables the loan to be repaid in full, whilst ensuring compliance with the UK Subsidy Control Act 2022.

In October 2025, the British Council told the Foreign Affairs Committee that there was an urgent need to resolve the issue as there would otherwise be a significant threat to the financial stability of the British Council. In 2024-25, the British Council made a net loss of £40.1 million, with a total expenditure of £1,054 million.

Scope of the report

Given the time that has elapsed since the loan was issued and the ongoing Parliamentary interest, we decided to conduct an investigation looking at the financial position of the British Council. Our report covers:

  • the role of the British Council and the impact that the pandemic had on its finances
  • the initial loan support that FCDO provided to the British Council
  • current loan support and negotiations over the future terms of support

Conclusion

FCDO has been providing loan support to the British Council for six years since the onset of the pandemic. The British Council and FCDO agree that the British Council plays a valuable role, most notably in promoting Britain’s soft power influence across the globe.

Finding agreement on how the British Council can become financially sustainable going forward has proven harder. FCDO wants to find a financially sustainable solution which enables the British Council to repay the £197 million loan.

The British Council, for its part, accepts the need for it to return to profitability but sees no viable path for it being able to repay the loan in the foreseeable future. At present, FCDO and the British Council are yet to reach agreement on a revised loan arrangement though the expectation is that this will happen soon.

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View press release (17 Jun 2026)

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