U.K., Oct. 30 -- UK Parliament issued the following news:

The British Council estimates that it generates over £1bn in soft power activity for the UK each year - and yet its future is in danger over a £197m loan. The PAC, in a new report on the Council's financial sustainability, is calling on both the FCDO and Council to work together to set out a positive vision for the future of the British Council that will build on its soft power value to the UK, including whether its commercial function should be structured as a subsidiary of the broader charity.

Read the report

The PAC's report is calling on the FCDO to set out what more it can do to support the British Council and improve its soft power impact. It should explore how it might convert as much of this loan as possible into a grant or similar, and offset it against the British Council's soft power value.

The British Council both has a role as a state-supported instrument of UK soft power, with a profit-making commercial arm that was put under great pressure when the pandemic temporarily shuttered the English teaching and exams business from which it derives much of its income. Its financial sustainability has been precarious ever since. The FCDO loaned it £197m in March 2024 on commercial terms, considering the Council a commercial organisation; an assessment which the Council itself disagrees with, claiming that it acts as the best-known soft power organisation in the world on a relatively small grant budget.

When it swiftly became apparent the Council would not be able to repay the loan on time, an unacceptably slow negotiation over restructuring it followed. The PAC's report shows the uncertainty this delay caused had a tangible impact on the Council's operations. This all comes as the Council has cut more than a third of its staff and plans to reduce headcount further, dispose of historical assets and close operations in nine countries, all while attempting to stabilise and grow revenues.

The FCDO is now more than a sponsor of the British Council - it is also a lender. It is clear to the PAC that this change has proved challenging, and further that the FCDO has lacked confidence in the Council's leadership, commissioning four external reviews of the British Council since August '25. This also reflects lessons learned from 2020, when the Council made incorrect assurances about its profitability, leading to the failure of its business plan.

The report further shows that the Council's financial plans in this same period, with falling reserves and no surplus expected for until '29-'30, leaves it financially very vulnerable and highly dependent on there being no further economic disruption to its organisation. The PAC recommends the Council, which is making headcount reductions projected to reach almost half of its workforce by 2029-'30, show how it is consulting its staff on these cuts, and balancing the tension between making them, and growing the Council's revenue and soft power impact.

Chair quote

Sir Geoffrey Clifton-Brown MP, Chair of the Public Accounts Committee, said: "The British Council is the UK's soft power flagship. Through it, we are very lucky to have a welcoming and open shopfront for British culture across the globe. Our Committee's report is of course concerned with the hard data of its finances, dealt a severe blow by the disruption caused by the pandemic, which for the sake of the taxpayer must be returned to a sustainable position. But we recognise the inestimable value of the Council's work beyond its year-to-year commercial operations, and the FCDO should too. A more collaborative tone must be returned to relations that seemed sadly absent over the course of our inquiry.

"With the Council seeking a leaner operation at a time of continuing precarity and obvious vulnerability for its finances, it needs the government's help to continue its vital work, not to be simply pursued as a debtor. This will require leadership and humility to be shown by the FCDO in recognition of how fortunate the UK is to have the Council out there in the world - while the Council in its turn must demonstrate to the FCDO that it can master its financial position in the uncertain years ahead. This is a question of balance. The FCDO says the British Council must adapt to survive. That may be true - but it will fail to do so without the government's full-throated support."

Further information

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