British Council moots axing 25% of workforce to pay off pandemic loan

The British Council’s plan to turn around its finances includes slashing around a quarter of its workforce and closing offices in 11 countries – although even with these measures it is still not expected to come out of the red until 2029/30, according the the NAO’s probe.

It follows a £197m loan, agreed on commercial terms, from the Foreign, Commonwealth and Development Office (FCDO) after the pandemic saw the British Council making net losses of £184m.

It has already made sweeping changes to the business to pay back the loan – including cutting 2,110 full-time staff since April 2021, forecasting that this would make £179m in savings. But the NAO noted that the British Council has not been able to repay more than interest repayments since April 2024 and is currently not expected to make a profit until 2029/30.

According to the NAO, the British Council must work with the FCDO on agreeing the organisation’s future role, as well as establishing a “sustainable” repayment plan.

It said it understands that the two parties are in the final stages of an agreement that will see the loan repaid in full within 15 years, along with other measures to make sure the British Council can successfully implement its turnaround plan.

In response to a request for comment from The PIE News, the British Council said it was doing all it could to cut costs and grow its revenue, “ensuring that the British Council is modern, efficient and able to adapt to changing economic conditions”. It said it welcomed the NAO’s report, which it said set out the challenges it faced since being “hit hard” by the pandemic.

We look forward to agreeing 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 globeBritish Council spokesperson

“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,” a spokesperson said.

“We look forward to agreeing 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,” they added.

While the British Council’s initial government loan totalled £60m in July 2020, it has been amended several times since then. The loan was originally due to expire in September 2026, but in February the government agreed to a year-long extension, with an agreement to find a longer-term restructuring deal by July 2026.

As a condition of the loan extension, the British Council came up with a five-year business plan to mitigate the planned impact of the pandemic, which must still meet with FCDO and ministerial approval.

The plan aims to deliver £306m in net benefits by 2029/30, forecasting that the organisation would make £289 million from higher revenues made up mostly from £172 in restructuring efficiencies.

However, even if it delivers on the steps set out in its turnaround plan – which would see some quarter of its workforce made redundant – the British Council is still expected to lose money until 2029/30, when it forecasts it will generate a profit after tax and investment in growth of some £9 million.

Head of the NAO, Gareth Davies, said there was recognition across the UK government of the “valuable role” the British Council plays in promoting Britain’s soft power around the world.

“Our regular audits of the British Council have highlighted the uncertainty caused by the loan arrangements and whether the organisation can be financially sustainable in the long term,” he said,

“The revised loan agreement currently being negotiated needs to provide clarity on the future of the Council and the eventual settlement of the loan.”