NAO recommends early warning system for museum finances as 53% report worsening position despite 53% increase in self-generated income to £563m.
The National Audit Office (NAO) has recommended that DCMS establish indicators to better identify early warning signs of financial difficulty at museums and galleries, as more than half report worsening finances.
The report, ‘The financial resilience of DCMS-sponsored museums and galleries’ includes responses from the 15 museums and galleries sponsored by DCMS. It says that museums and galleries increased their total self-generated income by 53% in real terms from 2021-22 to 2024-25, reaching £563m and returning to pre-pandemic levels despite lower visitor numbers.
But the same museums and galleries collectively report that their costs have increased by 18% in real terms over the same period, as visitor numbers remained 13% below the annual pre-pandemic average, at 42 million compared to 48 million.
NAO now says that the DCMS must ensure that it has structures in place to identify early warning signs, should museums and galleries start struggling to manage their financial risks, so it can intervene early, before additional funding is required.
The institutions report that self-generated income has been boosted through strategies such as venue hire, donations and membership schemes, paid-for visitor experiences, hospitality and retail.
They also report having drawn on financial reserves and sought to contain costs through measures including redundancies, not filling vacancies, having fewer staff on duty and retraining staff in both security and museum guide duties.
But the National Audit Office concludes that these measures come with risks, describing self-generated income sources such as blockbuster exhibition income as “volatile”.
The report says cost containment measures may impact museums’ and galleries’ ability to preserve their collections and maintain free access. It reports that a third of museums and galleries have been concerned about their ability to deliver these core objectives over the next three years, with 20% looking at their service offer to control costs.
Some institutions may lack the financial management capacity to manage future risks, it said.
Over half of the museums and galleries reported to the NAO that they were facing a worse financial position in August 2025 than three years ago, while five said they were in a better position.
DCMS increased funding to museums and galleries for 2025-26 by £31m, including £24.8m to provide all institutions with a minimum 5% increase in their funding, with additional support for six in the most financial difficulty.
The NAO now recommends that DCMS should identify a set of indicators of museums’ and galleries’ financial resilience to identify potential early warning signs of financial difficulty. The DCMS should communicate to the institutions the factors it considers when deciding their annual funding allocations, and communicate a plan setting out how it will support sharing of good practice, it said.
The NAO also recommends that museums and galleries should establish financial plans that reflect greater certainty over government funding, agree collectively how they can consistently capture data on key costs to facilitate more insightful comparisons between institutions, and review whether their financial management capability is sufficient to manage future risks.
Gareth Davies, head of the NAO said :”DCMS-sponsored museums and galleries are working hard to build their own sources of funding. They will need to continue to develop their financial management capability to maintain this momentum and withstand future shocks.”
The DCMS-sponsored museums and galleries are the British Museum, Museum of the Home, Horniman Museum, Imperial War Museums, National Gallery, National Museums Liverpool, National Portrait Gallery, Natural History Museum, Royal Armouries, Royal Museums Greenwich, Science Museum Group, Sir John Soane’s Museum, Tate Gallery Group, Victoria and Albert Museum and The Wallace Collection.
