23 April 2014 
Matt Sisson, Projects and Membership Manager
An article in this week’s Times Higher analyses the financial health of the sector following the first full year of £9,000 tuition fees. It looks at fee income, surpluses, capital investment, pay awards, and borrowing, and features comment from current BUFDG Chair Bob Rabone, as well as previous Chair Andrew McConnell.
The article places the small decrease in overall surpluses (down from 4.5% of income to 3.7%) in the context of student number volatility, as well as general uncertainty over the future of the current fees system. Whilst post-92 institutions appear to enjoy marginally higher surpluses on average, all institutions are facing the challenge of self-funding capital expenditure now government funding has significantly reduced, as well as ‘building a war-chest’ in uncertain times, whilst balancing wage pressures.
An example of the kinds of challenges HEI managers face is explained by Bob Rabone, who according to the THE outlined that “the fall in surpluses may have something to do with increased volatility in student numbers under the new system. A decrease in numbers will hit income before a university has a chance to reduce its costs in line with the decline. But a rise in home undergraduate numbers is likely to produce only a marginal financial benefit – given that any increase in student numbers requires more spending on teaching or accommodation”.
The article also outlines the pressures from plans for the sector to increase capital expenditure from £2.6bn to £3.9bn, funded by a mixture of cash reserves and borrowing. HEFCE projections show that “net liquidity is expected to fall by £1,173 million to £6,224 million by 31 July 2014, below the projected sector borrowing level”. Andrew McConnell highlights how this is new territory for the sector: “Cash reserves are falling, borrowing is increasing” he says, “that is the only way you can fill the gap if you’re not generating enough cash. In the time I’ve been in the sector, I think the sector has always had more cash than debt.”
Finally, picking up on last week’s newsletter from the International Unit which had mixed news on international student numbers, Bob Rabone commented that overseas income is “often portrayed as being icing [on the cake], or some sort of cherry – and it is not. It is fundamental to institutions.”
Click to read the THE article in full.
