Universities remain well placed to recover from the financial
impact of the pandemic, new research published by the Office for
Students (OfS) today shows. Despite a positive picture across the
sector as a whole, the regulator has warned that an overreliance
on income from overseas students represents one of a number of
financial risks to individual universities.
The report – Financial sustainability of higher education
providers in England – 2022 update – also highlights
increasing pension costs, fluctuation of student numbers and
rising costs as key risks to be managed by universities in the
short and medium term.
The report shows that, across the sector as a whole, universities
and other higher education providers project:
· Total income to grow
from £37.31 billion recorded in 2020-21 to a forecast £45.72
billion in 2024-25.
· A reduction in
borrowing, both in cash terms and as a percentage of total
income. Providers forecast £13.78 billion of external borrowing
in 2024-25 (compared to £14.10 billion in 2020-21).
· A reduction in the
aggregate surplus in the sector (adjusted to exclude pension
provision adjustments) in the coming years. A surplus of £1.74
billion (4.7% of total income) was recorded in 2020-21. This is
forecast is to fall to £896 million (2.2% of total income) in
2021-22 before recovering to £1.67 billion (3.7% of total income)
in 2024-25.
· Cash flow from
operating activities to decline in the short term before picking
up to approximately pre-coronavirus levels over the longer
term.
· Expenditure to
increase at an overall higher rate than income during the period,
with a warning that inflationary pressures are likely to be more
significant than universities have forecast.
On overseas students, the report says:
“The sector, and some providers in particular, continue to be
reliant on recruitment of students from China. Any event that
reduces the flow of such students to the UK is likely to have a
significant impact. The number of Chinese students studying at
English higher education providers showed no growth in 2020-21,
whereas the number of Indian students studying at English
providers was almost 50 per cent higher than the previous
year.”
Commenting on the report, Susan Lapworth, interim chief executive
of the OfS, said:
“Looking at the aggregate picture for the sector, universities
and other higher education providers have continued to weather
the financial impact of the pandemic and are in good shape for
sustainability in the longer term. But we continue to see
significant variability in the financial position for individual
institutions.
“As we set out in the report, universities need to carefully
consider whether they can deliver the growth they have forecast
and whether they are becoming too reliant on income from overseas
students, particularly if these students come from a small number
of countries.
“There are several other challenges to financial performance,
which include the potential for fluctuations in student numbers,
rising pension costs for staff, and growing inflationary pressure
on costs. Our analysis suggests that recent inflation figures are
higher than the levels that institutions have applied in their
forecasts.
“Individual institutions are responsible for managing their own
financial position and making good judgments about any action
they need to take in response to changes in their operating
environment. The OfS continues to monitor their financial health.
As well as collecting and analysing detailed data on the finances
of individual universities, we continue to draw on information
from other sources, including our engagement with individual
universities and other stakeholders, including the sector’s
lenders.
“We have a range of tools at our disposal should an institution
encounter financial difficulties and will always take steps to
protect the interests of students.
“This is an area which has rightly attracted scrutiny in recent
months, and we are continuing to respond to the points made in
reports from the National Audit Office and the Public Accounts
Committee.”
