Conclusion 2

It is unacceptable that the British Council and FCDO took so long to reach an agreement on a long-term solution for restructuring the current loan of £197 million. FCDO and the British Council agreed the current fixed-term loan of £197 million in March 2024. It was apparent, however, from September 2024 at the latest that the British Council was not going to be able to repay the loan in March 2025, as per that loan agreement. Throughout 2025 and 2026 the two organisations have been in negotiations over revised terms for the loan, which has been extended twice and is now due to mature in September 2027. This delay has had tangible impacts on the British Council as it sought to implement its turnaround plan. One such impact was the year delay between the British Council’s sale of its Madrid School in April 2025, and FCDO giving permission for the British Council to invest the proceeds of the sale in its turnaround plan. As of July 2026, the overall principles of the loan negotiations had been agreed, with a 15-year repayment period and an agreement that FCDO would accept some ‘trapped cash’ as interest repayment. The British Council estimates that it generates over £1 billion in soft power activity for the UK each year, and yet its future is in danger over a £197 million loan. recommendation a. The FCDO and the British Council should write to us alongside their Treasury Minute response, laying out how the agreed approach to the loan provides value for money for the British taxpayer while harnessing the important soft power role the British Council plays around the world. b. The FCDO should write to us on what steps could be taken to offset the loan against the soft power value provided by the British Council and convert as much of the loan as possible into a grant or similar.