The British Council is facing job cuts to help pay its £197m debt | Foreign, Commonwealth and Development Office

The British Council is facing cuts to its workforce and closures in 11 countries as it struggles to repay a Covid-197m government debt that threatens its survival, the public finance watchdog has said.

The UK’s soft power sector still has six years to lose from the pandemic and is not expected to make a profit until 2029-30, a report from the National Audit Office says.

2020 loan repayment from Foreign, Commonwealth and Development Office (FCDO), which was originally £60m plus market value interest and now stands at £197m, is due in September 2027.

The organisation, which has promoted the teaching of the English language and UK culture abroad for nearly a century, has not paid back any money since 2024 but has paid interest of $42m and expects to pay another £53m in interest by 2029-30. It has cost £184m since the outbreak.

The FCDO and the agency are now said to be in the final stages of negotiations to agree on the terms of the loan repayment, with the aim of agreeing to repayment within 15 years, the report said.

The relief plan proposed by the agency would include reducing staff by around 15%, or about 1,180 of the global workforce of 7,880, by 2029-30 through redundancies, non-renewal of contracts and environmental cuts, it is understood.

This adds to the 2,110 jobs already lost from 2021. Jobs will be closed in 11 countries and restored in another 15 countries, the report said. The agency did not confirm the details.

The NAO said that the current plan would require ministerial approval.

Downsizing and outsourcing have led to recent labor strikes in Europe, in particular Spain and Italyas well as letters of no confidence in the management of the British Council.

The British Council offered to repay the loan through an exchange of his paintings, which included works by LS Lowry, Francis Bacon, Tracey Emin and David Hockney, which was rejected. It has also asked for the loan to be written off, a move rejected by the FCDO and the Treasury due to the UK Subsidy Control Act 2022, the report says.

Gareth Davies, chief executive of the NAO, said any deal would have to explain to parliament about the organisation’s financial future and repayment of the debt.

Geoffrey Clifton-Brown, chairman of the public accounts committee, described the organisation’s financial situation as “deep and unacceptable”.

He said: “It is not sustainable for the FCDO and the British Council to continue to increase the loan year after year, instead of agreeing on a sustainable way; they need to do so urgently to ensure the long-term viability of the British Council.”

A spokesman for the British Council said it had received the report, “which clearly outlines the challenges we have faced since our operations around the world were hit hard by the Covid-19 pandemic”.

The spokesman said: “We are doing everything necessary to reduce costs and increase our income, to ensure that the British Council is modern, efficient and able to adapt to the changing economy.

“Besides this, we continue to work with the FCDO to resolve the major problem of our $197m public debt, which was issued for commercial purposes, with interest at market rates.

A UK government spokesman said: “Government support was needed to stabilize the British Council following the shock of the pandemic.

“Our aim is to reach a long-term agreement which helps to get the British Council back on track while protecting the public finances.”