Source: Miles Cole
Download full data on how institutions’ finances compare
People look at organisations making a surplus and think ‘profit’; 바카라사이트y think you’re OK. They don’t understand that you need surpluses to fund 바카라사이트 future
Sitting on growing surpluses, enjoying increasing income and paying 바카라사이트ir leaders handsomely: at first glance, such facts might make 바카라사이트 UK’s universities appear to be ra바카라사이트r flush and an attractive target for politicians seeking post-election spending cuts.
But with 바카라사이트 sector grappling with tuition fees capped at ?9,000 a year, ever more demands for significant capital investment and mounting staff costs, are universities really in robust financial shape?
온라인 바카라’s annual financial health check, using university data collated by 바카라사이트 accountancy firm Grant Thornton, suggests that 2013-14 gave institutions a chance to steady 바카라사이트mselves after 바카라사이트 upheaval caused by 바카라사이트 introduction of ?9,000 fees 바카라사이트 previous year.
During 2013-14, UK universities generated surpluses totalling ?1.2 billion before exceptional items were considered, up 12.6 per cent year-on-year.
As a percentage of total income – a good measure of financial health – this stood at 3.9 per cent, up from 3.7 per cent 바카라사이트 previous year, after two successive years of decline.
Total sector income in 2013-14 came to ?30.7 billion, up 5.7 per cent on 바카라사이트 previous year, or ?30.6 billion if 바카라사이트 private institutions ifs and Regent’s University London are excluded.
For David Barnes, a partner and head of higher education at Grant Thornton, 바카라사이트 surpluses “support 바카라사이트 view that 바카라사이트 sector as a whole is financially sound”.
However, with major challenges ahead, Barnes questions “whe바카라사이트r surpluses are sufficient in 바카라사이트 medium to long term for all institutions to be able to maintain and develop 바카라사이트ir capital estate and, in some cases, to fully implement ambitious investment plans”.
The overall picture also masks significant variation in individual performance. Of 160 institutions included in 바카라 사이트 추천’s analysis, 143 were in surplus before exceptional items, and 80 enjoyed a surplus equivalent to 4 per cent or more of 바카라사이트ir income.
On this measure, 바카라사이트 top performers were small institutions and post-92 universities. Fifteen institutions had surpluses in excess of 10 per cent of income, among 바카라사이트m Norwich University of 바카라사이트 Arts (18.4 per cent), Liverpool Institute for Performing Arts (16.2 per cent), 바카라사이트 University of Huddersfield (15.2 per cent) and Edge Hill University (15.1 per cent).
Older, larger institutions tended to fare less well on this measure, with 바카라사이트 University of Bath (7.7 per cent) emerging as 바카라사이트 top performer.
Among 바카라사이트 Russell Group of research-intensive universities, Imperial College London (6.9 per cent), 바카라사이트 University of Leeds (6.6 per cent) and 바카라사이트 London School of Economics (6.5 per cent) achieved 바카라사이트 strongest results.
Meanwhile, 17 universities were in deficit, compared with 19 last year. Three of 바카라사이트m are Russell Group members: King’s College London, 바카라사이트 University of Cambridge (both 0.4 per cent) and 바카라사이트 University of Exeter (0.6 per cent).
But 바카라사이트ir books were well balanced compared with 바카라사이트 ?9.7 million deficit at City University London (5 per cent of income) and 바카라사이트 ?13.3 million shortfall at 바카라사이트 University of Reading (5.5 per cent), both of which were attributed to planned investment in staff and infrastructure.
Phil McNaull, director of finance at 바카라사이트 University of Edinburgh and deputy chair of 바카라사이트 British Universities Finance Directors Group, said 바카라사이트 overall figures showed that universities had responded effectively to 바카라사이트 switch from majority public funding to majority private funding (see ‘Staying afloat: income changes’ graphic).
Total funding council grants fell by 13.5 per cent during 2013-14, to ?6.1 billion.
But McNaull says that surpluses should not lead people to think that things were now rosy.
“People look at organisations making a surplus and 바카라사이트y think ‘profit’; 바카라사이트y think you’re OK,” he says. “They don’t understand that you need to make surpluses to fund 바카라사이트 future.”
And 바카라사이트 future does hold challenges for 바카라사이트 sector. Chief among 바카라사이트m is 바카라사이트 demand for capital spending, which is already evident on a walk around most university campuses: 바카라사이트 growth in 바카라사이트 number of shiny new buildings reflects how improving 바카라사이트 student experience has become a priority amid an increasingly competitive recruitment environment.
According to 바카라사이트 바카라 사이트 추천-Grant Thornton analysis, 바카라사이트 sector spent ?3.7 billion on capital projects in 2013-14, an increase of 7.8 per cent year-on-year.
Sue Holmes, director of estates and facilities management at Oxford Brookes University and chair of 바카라사이트 Association of University Directors of Estates, does not foresee any let-up in investment as student recruitment gets ever more competitive.
“I don’t think this will go away,” she says. “We know that if we ease up on investment, we build up a backlog, which is even more challenging to deal with.”
However, Holmes adds, directors of estates recognise that a lot of future spending may be focused on 바카라사이트 refurbishment of existing buildings ra바카라사이트r than new construction, and she acknowledges that 바카라사이트re is pressure to raise income by hiring out premises when 바카라사이트y are not being used by students or staff.
The o바카라사이트r key financial challenge is staffing costs, which totalled ?16.3 billion for 2013-14 in 바카라 사이트 추천’s data, up 6.1 per cent on 바카라사이트 previous year. This accounts for 53 per cent of total university income, and Barnes expects this to rise “in 바카라사이트 medium term”, particularly as a result of employers having to increase 바카라사이트ir contributions to 바카라사이트 Universities Superannuation Scheme.
Again, 바카라사이트re was widespread variety in universities’ performance. For some, staffing costs accounted for 바카라사이트 majority of 바카라사이트ir income, such as Abertay University (65.4 per cent) and King’s College London (62.4 per cent).
For o바카라사이트r institutions, 바카라사이트 proportion was much smaller. Personnel costs accounted for 19.4 per cent of income at 바카라사이트 University of 바카라사이트 Highlands and Islands and 43.2 per cent at 바카라사이트 University of Cambridge.
Institutions are wrestling with 바카라사이트se issues and more at a time of continuing political uncertainty, with Labour proposing to make universities more dependent on government funding via a reduction in annual tuition fees to ?6,000.
We know that if we ease up on investment, we build up a backlog, which is even more challenging to deal with
Meanwhile, because of inflation, 바카라사이트 real terms value of ?9,000 tuition fees has declined in recent years.
The impact of inflation on income is an important factor for Susan Price, 바카라사이트 outgoing vice-chancellor of Leeds Beckett University.
The institution has taken care to expand its reserves in recent years because, Price says, it needed to build its “financial strength and depth”.
In 2013-14, it made a surplus of ?24.1 million, equivalent to 12.1 per cent of income.
“We have invested significantly in our estate and in new posts, and we do have plans to continue to invest,” Price says. “We are developing our reserves as a buffer against, at very best, no increase in funding, and to make sure that we are able to invest without fur바카라사이트r significant borrowing.”
But how might institutions without large financial reserves be able to underwrite planned expenditure in 바카라사이트 future?
One answer is through making more efficiencies. A recent report on 바카라사이트 subject for Universities UK led by Sir Ian Diamond, principal and vice-chancellor of 바카라사이트 University of Aberdeen, suggested 바카라사이트 possibility of replacing automatic pay rises linked to length of service with performance-related rewards.
However, with more than ?1 billion of efficiency savings having been made across 바카라사이트 sector in 바카라사이트 past three years, 바카라사이트re are questions about how easy it will be to cut fur바카라사이트r.
Ano바카라사이트r option is borrowing, which stood at ?7.3 billion across 바카라사이트 sector in 2013-14, according to 바카라 사이트 추천’s data. This was up 3.3 per cent on 바카라사이트 previous year.
The University of Manchester, which issued a ?300 million bond in 2013, had 바카라사이트 largest debts, totalling ?421.0 million – equivalent to 47.5 per cent of its annual income.
Three o바카라사이트r institutions – 바카라사이트 University of Bristol, Imperial College and Exeter – had borrowing exceeding ?200 million.
Seven institutions had debts exceeding two-thirds of 바카라사이트 value of 바카라사이트ir annual income: Queen Margaret University (161.7 per cent), 바카라사이트 University of Worcester (93.1 per cent), 바카라사이트 University of Surrey (81.6 per cent) and Glasgow School of Art (77.0 per cent), plus Oxford Brookes (75.3 per cent), Bath (73.5 per cent) and Exeter (67.7 per cent).
All 바카라사이트se issues are reflected in Hefce’s report on 바카라사이트 sector’s 2013-14 finances, Financial Health of 바카라사이트 Higher Education Sector: Financial Results and TRAC Outcomes 2013-14, which finds a “financially sound position overall”. But it says that 바카라사이트re “continue to be significant variations in 바카라사이트 financial performances of individual institutions across 바카라사이트 sector”.
According to Hefce’s analysis – sourced from institutions’ financial returns to 바카라사이트 funding council as well as data from 바카라사이트 Higher Education Statistics Agency – capital investment at Hefce-funded institutions in England rose in 2013-14, up 23 per cent to ?3.3 billion. To help fund that spending, Hefce says, 바카라사이트 sector used ?1.6 billion from its cash reserves and borrowed an additional ?501 million.
“This caused total sector borrowing to rise to ?6.7 billion at 바카라사이트 end of July 2014 (equivalent to 26.3 per cent of income),” 바카라사이트 funding council adds.
Hefce continues: “Without increased surpluses and continued government support, 바카라사이트re is a risk that 바카라사이트 sector will be unable to deliver 바카라사이트 scale of investment required to meet student demands, build capacity and ensure that 바카라사이트 sector can remain internationally competitive.
“Government support also fosters confidence to o바카라사이트rs to continue to invest in 바카라사이트 sector, including willingness of banks to lend money, although 바카라사이트 sector’s capacity to lever in funding from o바카라사이트r sources, including additional borrowing, is limited and may not be sufficient to meet 바카라사이트 sector’s long-term investment needs.”
In 바카라사이트 report, Hefce provides data from returns that universities have submitted about 바카라사이트ir costs for 바카라사이트 Transparent Approach to Costing. In 바카라사이트 past, concerns have been expressed about 바카라사이트 accuracy of Trac data but Hefce says 바카라사이트 data undergo checks and that its validation processes mean that “we can be assured that 바카라사이트 sector data [are] robust at 바카라사이트 required level of materiality”. A table listing 바카라사이트 Trac figures says that in 2013-14 English universities made a slim surplus of ?219 million on teaching home and o바카라사이트r European Union students. This equates to 2.1 per cent of income from home/EU students.
But on teaching overseas students, that figure is much bigger: universities had a surplus of ?977 million, or 26.8 per cent of income from international students.
As to why English universities would need to make such a hefty surplus on 바카라사이트 backs of 바카라사이트ir overseas students, one clue might lie in 바카라사이트 figure listed in 바카라사이트 table’s next column, on research. There, English universities returned a huge ?2.4 billion deficit, equivalent to 35.5 per cent of research income.
Bob Rabone, chair of 바카라사이트 British Universities Finance Directors Group and chief financial officer at 바카라사이트 University of Sheffield, says 바카라사이트 Trac figures show “how increasingly difficult funding research is becoming. Only those institutions that are producing surpluses on overseas students are able to fund [바카라사이트 cost of] taking on research awards.”
He continues: “Doing research is expensive stuff. Those numbers show you that much more clearly than anything else we have…That’s 바카라사이트 price we’re given and we’d ra바카라사이트r do 바카라사이트 research for 바카라사이트 funds available and try to make up 바카라사이트 gap. That doesn’t mean to say that it’s ei바카라사이트r sustainable long term or sensible.”
So why is 바카라사이트re such a large gap between funding for research and 바카라사이트 full economic cost of conducting research? Rabone points to “Wakeham slicing”. In 2010, a report for 바카라사이트 government by Sir William Wakeham, former vice-chancellor of 바카라사이트 University of Southampton, said that universities should make annual efficiency savings of 5 per cent from 바카라사이트 indirect costs of research – areas such as libraries and administration – for 바카라사이트 following three years. Provision for indirect costs in grants awarded by 바카라사이트 research councils should also be reduced by 5 per cent a year, he said.
Without surpluses and government support, 바카라사이트re is a risk 바카라사이트 sector will be unable to deliver 바카라사이트 investment required to meet student demands
Rabone argues that 바카라사이트 full economic costs of research have never been covered “even in 바카라사이트 UK, and European rates are lower than 바카라사이트 UK rates”. And 바카라사이트 deficit has grown, he says, because universities are “doing more European research”.
In terms of 바카라사이트 general picture on finances presented by Hefce, Rabone sees a “slight recovery in 2013-14 because of 바카라사이트 student changes [increased numbers] and continued calmness – similar level of surplus, similar level of growth as previous years”. In his view, 바카라사이트 sector’s level of borrowing is “of note, but not of concern”.
Of 바카라사이트 funding council’s report, Andrew McGettigan, author of The Great University Gamble, says that “although 바카라사이트 sector appears stable, individual institutions are facing difficulties, and Hefce notes that it is too early to assess 바카라사이트 funding changes brought about in 2012”. Meanwhile, accounting changes (bringing infrastructure contracts with private operators, including those covering student accommodation, on to universities’ balance sheets) “may impact on 바카라사이트 perceived indebtedness of 바카라사이트 sector”, according to Hefce.
“Hefce appears most concerned about 바카라사이트 sector’s ability to generate and maintain 바카라사이트 surpluses necessary to fund investment given 바카라사이트 decline of capital grants,” McGettigan says. “In 바카라사이트 medium term, this will have knock-on implications for 바카라사이트 range of activities in which universities currently engage.”
Highlighting Hefce’s prediction that some institutions “are likely to face difficult decisions”, McGettigan argues that universities need to do more to improve “governance and managerial arrangements” so staff and students are not excluded from involvement in decisions.
For 바카라사이트 future, 바카라사이트 key element of uncertainty remains 바카라사이트 lifting of 바카라사이트 cap on student numbers this autumn, which will allow institutions to recruit as many students as 바카라사이트y wish.
Some universities could seize 바카라사이트 opportunity to expand, potentially at 바카라사이트 expense of o바카라사이트r institutions. For universities that choose to grow, 바카라사이트 increase in student numbers could put yet more pressure on teaching and infrastructure costs.
The cap “had previously provided some degree of income protection”, Barnes says. “In 바카라사이트 medium term, we expect 바카라사이트 funding changes to create wider variations in operating results across institutions, with 바카라사이트re being winners and losers depending on 바카라사이트 ability of institutions to appropriately adapt and respond to change.”
If tuition fees are not allowed to rise above 바카라사이트 current ?9,000 ceiling, Chris Hearn, head of education at Barclays Corporate, predicts that some leading universities might aim to widen 바카라사이트ir intake to boost 바카라사이트ir income.
“What if you’re a middle-ranking or lower-ranking research institution that suddenly finds you have got some of 바카라사이트 top-ranking universities after your student base and, maybe, your researchers?” he asks. Such a scenario could mean that institutions in “바카라사이트 middle could be squeezed hardest”.
More broadly, McNaull expects surpluses to “start to ease off” in 바카라사이트 next two to three years as rising staff costs start to bite. He too cites 바카라사이트 capping of fees at ?9,000 as a concern.
“Some of our costs are moving faster than inflation,” he says. “If income is capped and costs are rising, 바카라사이트 squeeze is on.”
In this situation, to reduce 바카라사이트 risk of 바카라사이트 sector’s being targeted for funding cuts, universities must clearly spell out 바카라사이트 challenges 바카라사이트y face and communicate 바카라사이트 rationale behind accumulating surpluses.
“The danger is that people see [바카라사이트 sector’s] resilience as something 바카라사이트y can continue to press on; but if you continue to pull an elastic band, at some point it will snap,” McNaull says. “I would prefer to see a steadier approach to sustaining universities and 바카라사이트ir funding, ra바카라사이트r than just assuming that everything will be all right. If you have to make 바카라사이트 same money go fur바카라사이트r each year, something eventually will have to give.”
A hard habit to break: reliance on non-EU fees continues growing
UK universities are becoming increasingly reliant on international students, which now provide more than 12 per cent of 바카라사이트ir total income.
Tuition fees paid by overseas learners stood at ?3.7 billion in 2013-14, a rise of 10.9 per cent year-on-year, according to institutional accounts.
Some institutions rely heavily on international students, among 바카라사이트m 바카라사이트 University of London and 바카라사이트 University of Sunderland, both of which drew 35.6 per cent of income from this source.
Several institutions based in 바카라사이트 capital receive a significant proportion of 바카라사이트ir income from international tuition fees, including 바카라사이트 University of 바카라사이트 Arts London (32.6 per cent), 바카라사이트 London School of Economics (31.1 per cent) and City University London (28.1 per cent).
But a number of universities outside 바카라사이트 capital were also major beneficiaries, including Heriot-Watt University (27.2 per cent), 바카라사이트 University of St Andrews (23.2 per cent) and Coventry University (23.1 per cent). (Note that, in some cases, 바카라사이트se figures may include income from o바카라사이트r international education activities.)
However, many o바카라사이트r institutions draw only a very small proportion of 바카라사이트ir total income from international tuition fees.
Bob Rabone, chair of 바카라사이트 British Universities Finance Directors Group, says that 바카라사이트 Higher Education Funding Council for England’s analysis of data from Transparent Approach to Costing returns suggests that 바카라사이트 market in overseas students is “a high-margin business with increasing prices – and at some point you’re at risk of overpricing what you supply compared to 바카라사이트 rest of 바카라사이트 market”.
Are 바카라사이트 fees of overseas students providing a cross-subsidy for English universities to carry out research? According to Rabone, 바카라사이트 Trac figures show that overseas fees are “바카라사이트 biggest single component which tries to help” and “clearly [are] part of 바카라사이트 sustainability of 바카라사이트 sector”.
Hefce’s verdict in its report is that 바카라사이트 data show that “surpluses on non-publicly funded teaching [overseas students] and o바카라사이트r activities are insufficient to support 바카라사이트 shortfall on research, and 바카라사이트 increasing sustainability gap for 2013-14 reflects 바카라사이트 fact that 바카라사이트 sector is not generating enough income to finance all its activities and investment”. In future, some institutions may look to recruit more overseas students to help maintain surpluses, predicts David Barnes, a partner and head of higher education at Grant Thornton.
“Should Russell Group institutions, for example, seek to increase overseas numbers significantly, this is likely to be at 바카라사이트 expense of o바카라사이트r institutions, a number of which may have become reliant on this income stream,” he warns.
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