Conclusion 1

The British Council is struggling to balance its role as an instrument of UK soft power with the need to generate profits as a commercial enterprise. The British Council has always acted as a state-supported soft power organisation that also has a commercial arm generating profits. However, since the COVID-19 pandemic, the commercial organisation has struggled and the British Council recorded net losses of £184 million over the period 2020–21 to 2024–25. The FCDO provided an initial loan of £60 million in July 2020, and this loan has since grown to its current size of £197 million. This loan is on commercial terms, as the FCDO considers the British Council to be a commercial organisation. The British Council itself disagrees with this assessment, claiming that it acts as the best-known soft power organisation in the world on a grant budget that is relatively smaller than that received by comparator organisations in other countries. Efforts to secure the long-term financial sustainability of the British Council have been ongoing since its 2020 business plan, but there is still a lack of clarity over how the organisation’s business model can adapt and survive in a post-pandemic world. The British Council now has a turnaround plan, and as part of this intends to close its offices in nine countries and make significant headcount reductions, while aiming to grow its commercial revenues and maintain its contribution to UK soft power. In order for the British Council to be sustainable and effective, the FCDO and British Council must work together to agree a forward path for the organisation. recommendation a. Alongside their Treasury Minute response to this report, FCDO and the British Council should write to us to set out a positive vision for the British Council, including detail on: ii. where it will operate; iii. whether it will continue to have a commercial function; and iv. whether its commercial function should be structured as a subsidiary of the broader charity. 3 b. The FCDO has said that the British Council must adapt to survive, but it cannot do that without the FCDO’s full and practical support. The FCDO should consider and set out what more it can do to support the British Council and improve its soft power impact.