Government has made progress in collecting repayments of
Covid-era support loans issued to the sports and culture sectors
– although risks remain to future recoveries and whether the
repayments can be managed at scale, according to a new National
Audit Office (NAO) report.1,2
Between October 2020 and March 2022, the Department for Culture,
Media & Sport (DCMS) lent £474 million to 120 borrowers
operating in the sports and culture sectors to help them weather
the financial shock of forced closure during
lockdown.3,4
£145.1 million of the culture loans went to performing arts
organisations. The top tier of English rugby union received
£123.8 million of the sports loans – equivalent to 26% of the
total loan book value.
DCMS issued the loans on favourable terms: an average term of 15
years, with three loans running for 25 years; repayment holidays,
on average for three years, where no repayments were due; and
almost all loans charged at 2% simple interest for the whole loan
period.
By October 2024, 45% of solvent borrowers had made at least one
repayment, with DCMS receiving a total of £40.9 million – 97% of
the repayments it had scheduled by that date. Eleven borrowers
have repaid their loans in full ahead of schedule, totalling £3.8
million.
However, DCMS does not expect to recover up to £29 million of the
loans issued to borrowers who subsequently became insolvent. The
taxpayer will also miss out on a further £11 million in future
interest. As at October 2024 – four years after the first loan
was issued – nine borrowers with loans totalling £46.1 million
had fallen into insolvency,5 representing 7.5% of the
total number of borrowers. DCMS expected 5% of borrowers to fail
in the first three years of the loans, with up to 14% failing
after ten years.
A further 61 borrowers are scheduled to start repaying during
2025, and all borrowers should make a first repayment by
September 2025. As such, DCMS may be required to respond to a
greater number of difficult cases. This increases the need for it
to improve its approach to managing the loan book.
DCMS is also closely monitoring the situation of top tier English
rugby union clubs given the need to protect its investment on
behalf of taxpayers. By June 2023, three of the 13 clubs in the
Premiership Rugby League had become insolvent,6
highlighting the sport's financial difficulties.7
The NAO recommends that DCMS models its expected costs for
managing the loan book over its lifetime, to include planning for
future scenarios where the loss of public money may be a risk. It
should also establish a strategy to evaluate its loan book and
engage with borrowers, as well as develop its approach to
learning lessons from its own loan book and from other government
departments and organisations operating loan schemes.
, head of the NAO,
said:
“Government issued loans to the culture and sports
sectors in extremely demanding circumstances, helping many
organisations survive the immediate threat of the pandemic.
“It has since made progress in achieving 97% of the
repayments scheduled to date.
“However, with all borrowers scheduled to start repaying next
year, and ongoing risks to future recoveries, government should
strengthen its longer-term plan for protecting taxpayers'
exposure.”
ENDS
Notes to editors
- The report will be available on the NAO website via the
following link from 00:01 Wednesday 18 December: https://www.nao.org.uk/reports/dcmss-management-of-its-covid-19-loan-book/
- The report examines whether DCMS is delivering value for
money through the management of its loan book. Its decision to
use loan funding alongside grants in the original support
packages and individual award decisions are not within the scope
of the report.
- DCMS manages the loan book. Two of its arm's-length bodies,
Arts Council England and Sport England, are the loan agents
responsible for the day-to-day monitoring and management of the
schemes, including relationships with borrowers.
- £256 million of the loans went to 37 culture bodies. The
remaining £218 million went to 83 sports bodies.
- As at October 2024, DCMS had recovered £10.1 million from two
of these insolvencies and expects to recover a further £7.3
million to £11.1 million from all the loan book insolvencies so
far.
- The three clubs were London Irish, Wasps and Worcester
Warriors. These clubs received 90% of the £46.1 million issued to
now insolvent borrowers.
- In June 2023, the government appointed two independent
advisors to help the Rugby Football Union and the Premiership
Rugby League stabilise the future of the sport.
