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British Council ‘at risk of disappearing’ over government Covid loan

British Council says efforts to get government to accept its £200m art collection to pay off its outstanding Covid loan have failed, leaving its long-term future in doubt.

Neil Puffett
3 min read

The British Council is in danger of disappearing within a decade due to ongoing financial challenges, the organisation’s chief executive has said.

Scott McDonald, who joined the British Council in 2021, said he is currently considering £250m in budget cuts that could result in hundreds of job losses and the withdrawal of the council’s presence in up to 40 countries. He added that without financial guarantees from government, the organisation’s future is in doubt.

“I think we’d be in real danger of disappearing, probably over a period of a decade,” he told The Guardian.

“And I don’t think I’m saying this just for headlines, I think it’s really true.”

The council, founded in 1934 and the oldest organisation of its kind in the world, promotes cultural relations and educational opportunities between the UK and other countries.

It has annual revenue of close to £1bn, generating around 85% of that from its commercial activities including language classes, professional communication courses, and networking opportunities.

Its financial issues stem from a £200m government loan made during the pandemic. The government is charging commercial interest rates with a rolling one-year term, which the council has said will leave it struggling to meet the repayments.

Help from government

“We really need help on that loan. The government’s got to turn it into something viable for us, and at reasonable terms,” McDonald said.

“I would like the loan to be written off but I think in this economic environment, it’s very difficult to justify. So I would just like reasonable loan terms of something like 25 years and a lower interest rate, and then we’d commit to paying it back fully.”

News of the council’s financial difficulties come just a week after the Foreign Office and DCMS launched the UK Soft Power Council to drive UK growth and security, which McDonald himself sits on.

McDonald said he offered the council’s collection of art valued at £200m, to the government in exchange for writing off the loan but to no avail. While the British Council wants to avoid selling any of its art collection, he says the financial situation may make it necessary.

“If we get better terms on this loan, and we get some extra funding, I think we should be able to prevent significant art sales,” McDonald said.

“If we get none of that, we have a £200m loan hanging over our heads that’s going to be due in another 12 months,” McDonald said.

‘Leaving a vacuum’

He added that should the council withdraw its presence from up to 40 countries it would “leave a vacuum” that could be filled by other states, potentially by “non-allies”.

“It opens up for Putin’s Russia to move into these places to teach language and promote culture and capture the minds of young people. So on a broader scale, that’s enormously detrimental,” McDonald said.

Last month, Labour MP Charlotte Nicholls asked parliament whether the British Council had to repay its pandemic loan on commercial terms.

In response, Foreign Office minister Hamish Falconer said the loan was made on commercial terms to ensure compliance with the UK subsidy control regime.

“The government remains committed to recovering the loan as soon as the British Council’s finances allow,” he added.