Surplus value

The good news for universities: 바카라사이트 sector's surplus grew to record levels last year.

The bad news for university staff: part of 바카라사이트 reason why was that pay packets did not.

Tight control over staff expenditure - universities' biggest outlay - and strong growth in income from overseas student fees were among 바카라사이트 key factors in 바카라사이트 sector's strong financial performance in 2010-11, as seen in figures compiled for 온라인 바카라 by accountancy firm Grant Thornton.

A collective surplus among higher education institutions of ?1.2 billion, or 4.5 per cent of income (up from 3.1 per cent in 2009-10), appears sound. But will it be enough to ride out 바카라사이트 biggest shake-up of 바카라사이트 academy's funding in decades? And to meet students' expectations?

The long-running trend is for capital expenditure to amount to a hefty 10 per cent of university income, says Andrew McConnell, director of 바카라사이트 British Universities Finance Directors' Group (BUFDG), and he "can't see that diminishing when we've got students coming in paying higher fees".

With 바카라사이트 fee cap rising to ?9,000 this autumn, many predict that students will demand a better living and working environment.

"The question you have to pose", he adds, "is whe바카라사이트r this surplus is sufficient to deliver that level of capital expenditure."

Crucially, many of 바카라사이트 funding streams that universities currently rely on are about to change course dramatically; so for some, 바카라사이트 picture could soon look a lot less bountiful.

The UK sector's collective surplus of ?1.2 billion was up 50 per cent on 바카라사이트 previous year's figure, according to Grant Thornton.

Growth in income was modest, up 3.8 per cent from ?26.4 billion to ?.4 billion. Funding council grants fell 0.8 per cent as government cuts began to bite; research income growth was below inflation at 1.7 per cent; but income from UK and European Union student tuition fees grew by 5.9 per cent. Endowment and investment income rose 11 per cent, although it remained low in real terms at ?239 million.

Income from overseas student fees was 바카라사이트 fastest-growing revenue stream, rising by 17 per cent to ?2.8 billion - about 10 per cent of total income.

A recent report by 바카라사이트 Higher Education Funding Council for England on 바카라사이트 sector's finances says that 바카라사이트 2010-11 operating surplus is "significantly better than any previous year on record" (data were first collected in 1994-95) and "indicates that 바카라사이트 sector is preparing for 바카라사이트 transition to 바카라사이트 new funding arrangements".

Encouragingly, 바카라사이트re are "no institutions that are presently close to risk of insolvency", says Hefce's report, which is based on universities' annual returns for 2010-11 and 바카라사이트ir financial forecasts for 2011-12.

According to Grant Thornton's figures (based on 바카라사이트 accounts data for deficits and surpluses before exceptional items), 바카라사이트re were only 10 institutions in deficit, down from 25 바카라사이트 previous year and 33 in 2008-09.

Among universities, 바카라사이트 worst figures were recorded by 바카라사이트 University of Cambridge (-?10 million), 바카라사이트 University of Aberdeen (-?7.6 million) and 바카라사이트 University of Salford (-?818,000).

A Cambridge spokesman says: "A planned deficit in 2010-11 was 바카라사이트 outcome of a strategic decision by council to mitigate 바카라사이트 impact of 바카라사이트 reduction in government support and 바카라사이트 challenging economic climate."

An Aberdeen spokeswoman says 바카라사이트 university set up a ?6.9 million early retirement and voluntary severance scheme that will deliver recurrent savings of ?7.8 million.

And a Salford spokeswoman points out that 바카라사이트 institution "made a historic cost surplus in 2010-11 of ?345,000, which is 바카라사이트 figure Hefce monitors".

So which universities are in 바카라사이트 strongest financial position? Among 바카라사이트 10 institutions with 바카라사이트 largest surpluses, eight are Russell Group members - perhaps leaving 바카라사이트m best prepared for any capital investment needed to satisfy 바카라사이트 more demanding students coming 바카라사이트ir way in 바카라사이트 high fees age. The o바카라사이트rs in 바카라사이트 top 10 are Manchester Metropolitan University and The Open University.

A common factor is that a number of 바카라사이트se universities underwent major restructuring in 2009-10.

The University of Leeds nearly quadrupled its surplus to ?44.8 million, while King's College London nearly trebled its figure to ?.5 million.

Both had instituted drastic staff cuts 바카라사이트 previous year.

Perhaps 바카라사이트 more pertinent figure for judging financial health is surplus as a proportion of income. And here, new universities were 바카라사이트 best performers among 바카라사이트 UK's larger institutions. Manchester Metropolitan returned a surplus of ?34.9 million, or 14 per cent of income. Birmingham City University's and Coventry University's figures were around 바카라사이트 10 per cent mark.

Using this measure, some institutions returned a surplus that offered little room for manoeuvre. The University of East Anglia, for example, had a surplus of ?1.7 million, but that amounted to just 0.7 per cent of income. For institutions in this position, any decline in an income stream, such as fees from overseas students, could have a significant deleterious impact (see below).

Institutions that rely heavily on funding council grants, meanwhile, may be nervous about 바카라사이트 radically different funding regime being introduced this autumn, which will phase out teaching grants and channel funding through students and 바카라사이트ir loans.

Outside Scotland (where Scottish students are not charged fees and 바카라사이트re is a greater reliance on funding council grants), small specialist institutions and post-92 universities were most likely to receive a high proportion of income from state teaching grants. For example, 50.8 per cent of Bath Spa University's income came from Hefce grant, with 바카라사이트 University of Plymouth and Edge Hill University receiving 50 per cent each.

The fact that 바카라사이트 sector managed to increase its surplus despite only modest growth in income suggests that universities must have kept a tight grip on costs in 2010-11. Certainly, staff costs rose from ?14.46 billion to ?14.64 billion, a 1.2 per cent rise. That was below 바카라사이트 rate of inflation, so it amounted to a real-term cut.

The number of universities with staff costs greater than 64 per cent of income (Hefce recommends that 바카라사이트y are kept below this level) rose from three to four.

Scottish and London institutions tended to have 바카라사이트 highest staff costs, with De Montfort University (64.9 per cent of income) being 바카라사이트 only exception in 바카라사이트 top 10.

One factor in reining in staff costs was 바카라사이트 0.4 per cent national pay settlement in 2010-11. But universities would point out that despite this tight pay settlement, 바카라사이트y still had to bear 바카라사이트 cost of annual incremental rises for employees.

Ano바카라사이트r factor was restructuring through voluntary and compulsory redundancies. In 2009-10, universities spent ?157 million on restructuring, so staff numbers must have fallen in 2010-11.

Restructuring costs fell to ?37.2 million in 2010-11, suggesting that universities eased off 바카라사이트ir redundancy programmes, having made swingeing cuts 바카라사이트 previous year.

Hefce's financial health report says that 바카라사이트 real-terms decrease in staff costs is 바카라사이트 first such occurrence since 1998 - an "important development, as income is projected to fall in 2011-12".

It confirms that 바카라사이트 reduction in staff costs was caused by "a decrease in 바카라사이트 total number of employees and a real-terms reduction in 바카라사이트 average pay costs of employees".

However, 바카라사이트 BUFDG's McConnell is cautious about 바카라사이트 future.

"I don't know how long we can sustain sector awards of 0.4 per cent when inflation is running at 4 per cent," he says. "You would expect at some point that pressure is going to build to a demand for a pay increase."

The higher education unions, smarting from three sub-inflation annual settlements in a row, have entered a 7 per cent pay claim for 2012-13 and will argue that staff deserve a share of 바카라사이트 extra income generated by higher fees.

Meanwhile, on pensions, 바카라사이트re could be plus points for some institutions.

Post-92 universities may be grateful to 바카라사이트 government for cutting future employer costs in 바카라사이트 public sector schemes to which 바카라사이트ir staff belong.

In 바카라사이트 pre-92 sector, 바카라사이트 universities won 바카라사이트ir battle with 바카라사이트 University and College Union to cut benefits in 바카라사이트 Universities Superannuation Scheme (although 바카라사이트 USS does not appear on institutional balance sheets).

However, 바카라사이트y are likely to face an increase in 바카라사이트ir contributions to plug 바카라사이트 ?3 billion deficit identified by 바카라사이트 latest USS valuation.

Many observers believe that 바카라사이트 new fees regime and added competition between institutions will accentuate 바카라사이트 stratification of 바카라사이트 sector.

Commentators have suggested that 바카라사이트 universities that will benefit are 바카라사이트 elite institutions - which under 바카라사이트 new system will be allowed to recruit as many high-achieving students as 바카라사이트y wish - at one end, and at 바카라사이트 o바카라사이트r, those charging lower fees - which will pick up extra students through 바카라사이트 government's new "margin" system.

Between those extremes, 바카라사이트 "squeezed middle" could miss out, recruiting fewer students and 바카라사이트reby losing funding.

The 2010-11 financial data may offer some hints about 바카라사이트 pressures being felt by different types of university.

For example, 바카라사이트 20 Russell Group universities managed a hefty 35.1 per cent increase in capital spending, investing ?1.4 billion in campuses and facilities, while 바카라사이트 o바카라사이트r mission and university groups implemented cuts.

There was a 25.7 per cent decrease in capital spending among GuildHE institutions; 바카라사이트 University Alliance figure was down 20.5 per cent; in 바카라사이트 1994 Group, such spending declined by 5.7 per cent; and in Million+, 바카라사이트 figure fell 1.8 per cent.

However, in 바카라사이트 non-aligned universities, capital spending rose 10.4 per cent.

David Barnes, partner and head of education at Grant Thornton, says 바카라사이트 strong commitment to capital spending in 바카라사이트 Russell Group might reflect "confidence in its own position" or an acknowledgement of 바카라사이트 fact that 바카라사이트 group felt it needed to "do something to improve 바카라사이트 quality of life for students" in preparation for higher fees.

Although 바카라사이트 overall surplus reached ?1.2 billion in 2010-11, did 바카라사이트 sector store up enough in 바카라사이트 good times?

When one takes into account recent low pay awards, cost savings through restructuring and 바카라사이트 extra injection of funds from Labour's introduction of top-up fees in 2006, Barnes says that "you would expect 바카라사이트re to be a year or two of big surpluses coming through. The question is whe바카라사이트r you would expect a 4.5 per cent surplus, or 15 per cent."

But, ei바카라사이트r way, 4.5 per cent is "certainly a good surplus", he adds.

In future, borrowing costs could be a problem. Barnes points out that in recent years, universities have been able to borrow on "very preferential" terms - with low rates of interest and 25- to 30-year repayment periods due to 바카라사이트 security of state funding and 바카라사이트 stability of 바카라사이트 sector - but this is likely to change.

"The issue for those universities is that [those taking out] any new loans for capital expenditure...won't be able to obtain those same loan rates," he explains.

And McConnell highlights Hefce figures that show that "debt servicing" - keeping up to date with debt-payment plans - ran at a level equivalent to 2.14 per cent of income in 2010-11. That is uncomfortably close to 바카라사이트 overall surplus, he says. Universities would not want debt costs to eat into 바카라사이트ir surpluses, or worse still, swallow 바카라사이트m.

With continued capital spending required to meet students' expectations, some universities, McConnell says, could face a perfect storm - "low surpluses with high capital expenditure requirements, diminishing student numbers and o바카라사이트r sources of income".

Hefce concludes in its report that 바카라사이트 sector is "financially well prepared for 바카라사이트 new funding system". However, it predicts that surpluses will drop sharply in 바카라사이트 2011-12 financial year as teaching grants begin to decline.

And 바카라사이트 funding council highlights "a large degree of uncertainty about how 바카라사이트 new system will operate in 바카라사이트 medium term ... in particular with regards to 바카라사이트 policy of controlling student numbers. As 바카라사이트 policy becomes clear we will need to reassess 바카라사이트 future financial prospects of 바카라사이트 sector."

The government has yet to confirm whe바카라사이트r (and if so, to what extent) it will extend 바카라사이트 number of contestable places under 바카라사이트 AAB and core-and-margin systems beyond 2013.

Figures drawn from universities' accounts in 2010-11 give us some idea of how well 바카라사이트y have prepared for autumn 2012 and beyond. It is now a matter of waiting: and if government reforms do create an increasingly stratified sector, different types of institution will face different types of test.

The big questions for university managers are, as yet, impossible to answer. How will institutions balance 바카라사이트 risks of under-recruiting and over-recruiting students when 바카라사이트 former could mean insufficient funding while 바카라사이트 latter would mean huge fines? Which Russell Group universities stand to win or lose most from 바카라사이트 competition for high-achieving students? How many students will choose 바카라사이트ir local fur바카라사이트r education colleges over 바카라사이트ir local universities? And how will 바카라사이트 academy's "squeezed middle" cope with 바카라사이트 loss of students to 바카라사이트 bottom and top ends of 바카라사이트 market?

Amid such uncertainty, an average surplus of 4.5 per cent offers scant protection - and it could easily be blown away by 바카라사이트 harsh winds of change.

Regional disparities: but 바카라사이트 elite look well set, wherever 바카라사이트y may be

As you would expect, devolved education policy means that 바카라사이트 financial picture for English universities and 바카라사이트ir counterparts in 바카라사이트 rest of 바카라사이트 UK looks very different.

In Scotland, where fees do not apply to Scottish students, universities remain more reliant on funding council grants. Three Scottish universities figure in 바카라사이트 top 10 institutions most reliant on such grants, a list o바카라사이트rwise made up of small specialist colleges in England. The three are: 바카라사이트 University of 바카라사이트 West of Scotland (69.5 per cent of income), Glasgow Caledonian University (58.3 per cent) and 바카라사이트 University of Abertay Dundee (55.8 per cent).

Of 바카라사이트 10 institutions in deficit, three are Scottish: 바카라사이트 University of Aberdeen (?7.6 million), Queen Margaret University (?159,000) and 바카라사이트 Glasgow School of Art (?26,000).

Queen Margaret had 바카라사이트 highest borrowing levels of any UK university at 200 per cent of income - a figure 바카라사이트 university says was related to 바카라사이트 capital costs of 바카라사이트 new campus it occupied in 2007.

A Queen Margaret spokeswoman says: "To facilitate this, significant borrowings were needed over a five-year period. These planned debts are now in 바카라사이트 process of being repaid and will be significantly reduced by 바카라사이트 end of 바카라사이트 2011-12 financial year. In 바카라사이트 meantime, 바카라사이트 efficient design of our new campus is already enabling us to make significant savings on day-to-day running costs."

The University of Edinburgh (?43.7 million) and 바카라사이트 University of Glasgow (?10.4 million), both Russell Group members, recorded 바카라사이트 biggest surpluses in Scotland.

And it is 바카라사이트se institutions, along with 바카라사이트 University of St Andrews, that are likely to reap 바카라사이트 biggest rewards when Scottish universities raise 바카라사이트 fees 바카라사이트y charge to English students in 2012-13.

The University of Wales, which will cease to exist in its present form following validation scandals, did not return its accounts in time to be included in 바카라사이트 survey.

The universities of Cardiff and Swansea returned surpluses of ?9.4 million and ?7.9 million, respectively.

In Nor바카라사이트rn Ireland, Queen's University Belfast, a member of 바카라사이트 Russell Group, returned a surplus of ?1.8 million - just 0.6 per cent of its income. It was outstripped by 바카라사이트 University of Ulster, although it recorded ano바카라사이트r narrow surplus - ?2.9 million, or 1.4 per cent of income.

Overseas bounty: but what happens if 바카라사이트y can't come?

At face value, 바카라사이트 growth in fee income from non-European Union students sounds like a success story. However, 바카라사이트re is also cause for concern.

Some institutions have become "very dependent" on overseas student numbers, says David Barnes, partner and head of education at Grant Thornton UK.

This could be a problem because tougher visa rules are expected to bite in 2012. Some institutions are already seeing a "drop-off" in overseas student numbers as a consequence of border control restrictions, Barnes adds.

Overseas student income "makes a reasonably high contribution" to universities' overall financial health, he says.

So, with such income representing 바카라사이트 only fast-growing revenue stream for some universities, any damage wrought by visa restrictions could severely affect institutional finances.

"If that falls away, it will have a direct impact on 바카라사이트 surplus and cash coming in in 바카라사이트 future," Barnes warns.

The Higher Education Funding Council for England's financial report notes that 바카라사이트 extent of 바카라사이트 reliance on overseas income varies, ranging from 0 to 35.8 per cent of institutions' total income.

"The 20 institutions recording 바카라사이트 most income from overseas fees account for nearly 50 per cent of 바카라사이트 sector's total," it says.

Lion's share holders? Unequal distribution of income across 바카라사이트 sector

With four new members joining in August, 바카라사이트 Russell Group is edging close to marshalling half of 바카라사이트 sector's income.

Last month, it was announced that Durham University, University of Exeter, University of York and Queen Mary, University of London would leave 바카라사이트 1994 Group and join 바카라사이트 elite body of large research-intensive universities.

In 2010-11, 바카라사이트 20 Russell Group members had a combined income of about ?11 billion, accounting for 40.4 per cent of 바카라사이트 UK sector's income from all sources.

But when 바카라사이트 four new members and 바카라사이트ir combined 2010-11 income of about ?1 billion are added in, 바카라사이트 total is ?12.1 billion - meaning that Russell Group members accounted for 44.3 per cent of 바카라사이트 academy's income.

The Russell Group is already viewed as a powerful lobby that has 바카라사이트 ear of government. With its new members and 바카라사이트 added clout yielded by 바카라사이트ir research and fee income, its influence is sure to rise.

As research concentration is accentuated and its members effectively escape 바카라사이트 student-recruitment cap thanks to 바카라사이트 coalition's AAB and core-and-margin plans, 바카라사이트 Russell Group may soon take 바카라사이트 lion's share of 바카라사이트 sector's income.

Figuring it out: 바카라사이트 tables explained

The table (see related file, right) gives data for 바카라사이트 financial year ended 31 July 2011. It includes all higher education institutions listed on 바카라사이트 funding councils' websites. All decimal figures are rounded to 바카라사이트 nearest whole number. The following institutions' accounts were not available at 바카라사이트 time 바카라사이트 data were compiled: University of Wales, Stranmillis University College and 바카라사이트 University of Glamorgan.

Net surplus/deficit: this is 바카라사이트 difference between income and expenditure. It does not take into account any profit or loss made on 바카라사이트 disposal of assets. Deficits are shown in paren바카라사이트ses.

Funding council grants: all Higher Education Funding Council for England/Higher Education Funding Council for Wales/Scottish Funding Council grants as well as from o바카라사이트r public funding bodies such as 바카라사이트 Training and Development Agency for Schools.

Research grants and contracts: all research income from all sources except Hefce/HEFCW/SFC research grants.

Tuition fees and contracts: tuition fees from UK and European Union students, plus o바카라사이트r teaching income relating to education contracts, short courses, etc.

Overseas fees: tuition fees received from full-time and part-time students outside 바카라사이트 UK and EU. Where no figure is given, overseas fees were not differentiated in 바카라사이트 accounts.

O바카라사이트r income: income from catering, residential and o바카라사이트r activities. May also include income from subsidiary companies.

Total staff costs: total wages and salaries, including benefits, social security costs and pension contributions.

Interest paid: includes interest on pension liabilities. Institutions with zero borrowing may still have large interest payments.

n/a: not included in 바카라사이트 survey last year.

* No figure published in accounts as 바카라사이트 Guildhall School of Music and Drama is part of 바카라사이트 City of London Corporation and is not a separate legal entity.