WIREDGOV

A review of university and college finances published by HEFCE concludes that the higher education sector in England was in sound overall financial health in 2012-13, and will remain so in 2013-14. However, the forecasts for 2013-14 do not reflect further significant funding reductions announced in the Government’s grant letter to HEFCE in February 2014.

Overall the sector reported operating surpluses of £956 million (3.9 per cent of income), which were £17 million less than the level reported for 2011-12 (4.2 per cent of income). Strong cash balances and healthy reserve levels were also reported in 2012-13. But future reserve levels and pension deficits are likely to be significantly affected by a new requirement on institutions to include pension scheme liabilities on their balance sheets.

The forecasts for 2013-14 show that the sector plans a considerable increase in capital infrastructure expenditure, from £2,646 million in 2012-13 to £3,861 million (a rise of 46 per cent). However, this growth may not be sustainable without continued government support and market confidence.

The recent slowdown in numbers of international students may also affect institutions’ growth plans, while the decline in part-time students looks set to continue.

There continues to be wide variation in the financial performance of individual institutions across the sector, and some institutions will face challenges if they experience repeated falls in student recruitment.

The removal of the student number cap from 2015-16 will create both opportunities and risks, and increasing levels of uncertainty over student recruitment. This could lead to greater volatility in financial forecasting, and even greater variations in individual institutional financial performance.

Professor Madeleine Atkins, HEFCE’s Chief Executive, said:

‘Universities and colleges continued to make efficiencies and to take a considered and careful approach to financial management during a period of change in higher education. While short-term health is not an immediate concern, future uncertainties and developments present key challenges for individual institutions and for the sector as a whole. Significant reductions in HEFCE funding and pressures on student recruitment will lead to greater volatility, and growth in capital investment, essential to the continuing success of the sector, will require government support.

‘Higher education is vital to economic prosperity. In a globally competitive environment, universities and colleges in England must maintain and build on their reputation for excellence in research, learning and teaching. It will be crucial to ensure an approach which secures long-term financial sustainability and fosters the confidence to stimulate increased investment in the sector.’    

Notes