Viability statement
Assessment period
In accordance with the UK Corporate Governance Code, the BBC Board has assessed the prospects of the Corporation over a longer period than the minimum 12 months required by the ‘Going Concern’ provision.
The three-year Plan covering the period to 31 March 2029 has been considered by the BBC Board and the 2026/27 Budget was approved.
A three-year horizon is considered appropriate as this is in line with the BBC’s budgeting and planning process, which is long enough to cover the majority of the commissioning and life cycle of programming and short enough given the pace at which we are seeing technological and audience behaviour changes. The three-year Plan, reviewed by the Board, considers cash flows as well as the financial covenants and credit facilities.
Key assumptions
The baseline assumption underpinning the three-year Plan is that the Charter and Agreement will be renewed broadly in their current form. This assumption impacts our view from 2028 onwards and is kept under close review given the significance of funding and scope decisions to the organisation’s future operating model.
Longer-term modelling is used to assess licence fee scenarios, with scenario modelling to consider material impacts which may occur post renewal. In the Board’s judgement, other key assumptions underpinning the three-year Plan, and the associated cash flow forecast are:
- the licence fee settlement that sets the financial parameters for the BBC from 2026/27 to 2027/28;
- levels of licence sales;
- the Charter and Agreement that protects a licence fee until 2027 along with the licence fee coverage assumptions and borrowing limits;
- being able to secure a sustainable funding model after 2027;
- legal positions relating to ongoing claims;
- market conditions impacting the BBC Commercial Group; and
- progress with the delivery of transformation and savings plans.
Risk assessment
The Board continually assesses the BBC’s prospects and risks throughout the year as part of the regular financial reporting processes (including performance against budget) and by robustly assessing emerging risks as required.
Following a detailed risk assessment as part of our annual budget process we identified income pressures leading to an increasing annual funding gap in the outer years of the plan. To address this, and ensure that net debt remains within agreed borrowing limits, we have instigated a new savings programme and are developing initiatives to deliver the required savings within the assessment period.
As a consequence, we will maintain additional oversight and operational focus on these areas. BBC management have implemented increased financial stress testing and sensitivity analysis in our financial planning routines, with increased governance and support from the Board. Quarterly cash management, savings progress and risk tracking reporting take place to ensure risk mitigation is a key priority.
This process provides enhanced visibility of future year cash projections. In addition to the Budget process, a robust assessment of the principal risks facing the Corporation, as described in our principal risks, has been undertaken, including those that would threaten its business model, future performance, solvency or liquidity.
We have considered the impact of climate change risks and do not believe they would have a significant financial impact on the business in the assessment period. Please refer to our Climate-related Financial Disclosures for further details.
We have undertaken a reverse stress testing exercise to test the limits of the BBC’s resilience under a combination of extreme events deemed to be of remote likelihood. The results of the reverse stress test support the approach taken in assessing the key financial risks that we face.
Downside scenario modelling
The media market continues to change. In response, the BBC must continue to transform to deliver its Value for All strategy and maintain public willingness to pay the licence fee. This requires strong financial management to deliver services and meet its public purposes within the funding available.
Consequently, we conducted additional financial stress testing and sensitivity analysis, considering income at risk and the potential impact of other risks, for example, delays in meeting savings targets, crystallisation of other financial risks, and changes in the expected level of dividends to be paid from the BBC Commercial Group to the BBC.
Sensitivity analysis has been undertaken in relation to the cash flow to model the potential effects should principal risks materialise, individually or in combination. The peak borrowing requirement was calculated by modelling a combination of hypothetical severe but plausible risks (see table). Even under severe but plausible downside scenarios, the application of identified mitigations is expected to keep forecast cash flows within available borrowing limits.
| Principal risk | Link to KPI | Scenario detail | Modelled scenario | Mitigations | Type |
|---|---|---|---|---|---|
Change in LF price | Income | The April 2026 Price methodology is based on a 12-month average (and Bank of England forecasts are used for future years). The licence fee price remains sensitive to changes in CPI. | A decrease in CPI of 50 bps vs Bank of England forecasts. | We have explored a number of high-level mitigations, consistent with delivering the BBC’s Value for All strategy and maximising return or reach on investment. | Recurring |
A negative movement in Reach of Licensable Content (ROLC) and/or Evasion | Time spent with the BBC; licences in force | Changes in audience behaviour, acceleration in the rate of ROLC decline, the current economic environment, reputational impacts and level of price increase could impact renewals and purchase of licences. | A decrease in ROLC/increase in evasion above the rates included in forecasts. | We have explored a number of high-level mitigations, consistent with delivering the BBC’s Value for All strategy and maximising return or reach on investment. | Recurring |
Savings risk or crystallisation of other cash risks | Savings delivery and cash/net debt | Changes in audience behaviour/negative impact on reputation and trust either impact the ability to deliver existing plans or requires an increase; together with other factors impacting timing of savings or ability to deliver in full. | The impact of savings plans not being fully achieved or plausible realisation of other financial risks. | We have explored a number of high-level mitigations, consistent with delivering the BBC’s Value for All strategy and maximising return or reach on investment. | One-off |
Decrease in the level of dividends paid by BBC Commercial Group | Commercial Free Cash Flow | Payment of dividends by BBC Commercial Group redistributes funds across BBC Group and enables the BBC to main positive cash balances. | Reduction of dividends in outer years of the financial Plan. | We have explored a number of high-level mitigations, consistent with delivering the BBC’s Value for All strategy and maximising return or reach on investment. | One-off |
Impact of any changes to the Charter and Agreement and/or the LF model | Cash/net debt | Charter renewal is a risk for the BBC, as the funding model, and our scope and service obligations will be negotiated with HMG. | Indicative transformation costs that might arise in implementing a new funding model together with potential changes to scope. | Engagement remains active between the BBC and HMG, noting that the Green Paper demonstrates HMG’s commitment to a sustainable and fair funding model. | Mix |
Conclusion
Taking account of the Group’s current cash/net debt position, planned cash flows, principal risks and available borrowing facilities, the Board has a reasonable expectation that the Corporation will continue to operate and meet its liabilities as they fall due over the assessment period.
