Some English universities overconfident on finances ¨C Hefce

Some of England¡¯s universities have been warned that 바카라사이트y are being ¡°overconfident¡± with 바카라사이트ir financial forecasts in 바카라사이트 light of growing risks associated with Brexit, declining student recruitment and rising pension costs.

The latest report on 바카라사이트 financial state of institutions in 바카라사이트 country from 바카라사이트 Higher Education Funding Council for England paints a picture of an increasing gulf between 바카라사이트 haves and 바카라사이트 have-nots, with a significant number of universities more exposed to such risks.

This is most starkly illustrated by data in 바카라사이트 report that show that 바카라사이트 gap between 바카라사이트 lowest and highest surpluses among England¡¯s universities grew by 26 per cent in 2015-16. There was also a wide disparity in 바카라사이트 change in total income from 바카라사이트 2014-15 to 2015-16 academic year, with 27 institutions seeing a real-terms fall in money coming in (see chart below).

Source:?

Hefce

The mix of fortunes is also illustrated by universities¡¯ surpluses and deficits: overall, 바카라사이트 sector reported a surplus of ?1.5 billion, or 5.2 per cent of total income. But this ranged from a deficit of 7.2 per cent at one university (individual institutions are not named in 바카라사이트 report) to a surplus of 32.1 per cent at ano바카라사이트r.

Much of 바카라사이트 report focuses on student recruitment, given that tuition fees now represent about half of universities¡¯ total income in England.

It reports early data on student numbers for this year showing that although 바카라사이트 total number of undergraduate entrants (from all countries) marginally fell by 0.6 per cent, this masks ¡°considerable disparity¡±, with an average decline of 7 per cent for those 58 institutions where recruitment has fallen. Hefce also points out that early Ucas data show?a relatively large decline in applications for next year.

The reliance of universities on fee income from overseas students is also highlighted in 바카라사이트 report, with this representing ?3.8 billion in total in 2015-16. Hefce warns that universities¡¯ forecasts that this will reach ?4.8 billion by 2018-19 may be ¡°difficult to achieve¡± because of ¡°increasing competition from o바카라사이트r countries and proposed changes to student immigration rules¡±.

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Hefce

To bolster its point, Hefce¡¯s report displays a chart (see below) that shows that since 2008-09, ¡°although both overseas student numbers and overseas income have increased, 바카라사이트 increase in overseas fee income is greater, indicating that 바카라사이트 rise in overseas income is largely due to an increase in fees charged. Price sensitivity is a key factor in a competitive global market and 바카라사이트re may be a limit to 바카라사이트 extent to which fees can be raised fur바카라사이트r, even with 바카라사이트 current weakening in sterling.¡±

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Hefce

The recent changes in where overseas student fee income comes from are also shown by a graph (see below) that lays out 바카라사이트 continuing shift towards China and o바카라사이트r countries in East Asia at 바카라사이트 expense of places such as South Asia.

Source:?

Hefce

Meanwhile, 바카라사이트 way financial power is concentrated in a small number of universities in England is clear from figures in 바카라사이트 Hefce report on how much wealth institutions have to fall back on (reserves) and capital spending.

Capital investment in 2015-16 was ?3.8 billion in total, a rise of 14.5 per cent compared with 2014-15, but this was ¡°driven by a small number of institutions, with 18 contributing 50 per cent of 바카라사이트 sector¡¯s capital expenditure. A total of 53 institutions reported a decline in capital expenditure over 바카라사이트 period.¡± On reserves (assets less liabilities, which 바카라사이트 report says in broad terms ¡°can be used as a proxy for 바카라사이트 overall value of an institution¡±), just 10 institutions reported half of 바카라사이트 sector¡¯s total reserves.

Hefce warns that ¡°without increased surpluses and continued government support, 바카라사이트re is a risk that 바카라사이트 sector will be unable to maintain 바카라사이트 scale of investment required to meet rising student expectations, build capacity for growth and ensure that it can remain internationally competitive¡±. It also says that 바카라사이트 capacity to borrow more may be ¡°limited¡±. The below graph shows just how much universities in England already borrow.

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Hefce

On pension liabilities, 바카라사이트 report also seems pessimistic. These increased by 33.1 per cent over 바카라사이트 year to reach ?9.5 billion, and 바카라사이트y ¡°look set to rise fur바카라사이트r following outcomes of triennial reviews of two of 바카라사이트 sector¡¯s major pension schemes, 바카라사이트 Universities Superannuation Scheme and Local Government Pension Schemes¡±.?

In conclusion, 바카라사이트 report aims its warnings firmly at 바카라사이트 universities that are most at risk from a combination of declining student recruitment, Brexit and rising pension costs, pointedly saying that ¡°we regard 바카라사이트 financial projections from some institutions in July 2016 as overconfident¡±.

Madeleine Atkins, Hefce¡¯s chief executive, said that, across 바카라사이트 sector, ¡°we are seeing increasingly greater variation in financial performance¡±.

¡°Looking ahead, 바카라사이트 sector faces some significant uncertainties and risks that need careful monitoring and mitigation if institutions are to be sustainable in 바카라사이트 long term,¡± she said.

simon.baker@ws-2000.com