70% of inoverisities facing large deficits -it's the newer universities that are going to suffer

[mids2019]

So I was listening to a radio 4 piece about the parlour state of university finances and I was struck that no mention was made that it wasn't the Oxford and Cambridges of this country that faced the realistic prospect of mass redundancies and department closures but the newer universities.

Mention was made of course duplication in subjects such as English and the need to rationalise but these closures would be occuring let's face it in non RG universities in all lijelihood.

When debating university prospects shouldn't we be open that it is is not a full sector problem but a problem that predominantly hits the newer universities which have perhaps overwxpanded?

I have been worried about durhams financial viability since before Covid.
20 days liquidity is pretty surprising although it isn’t the best metric, only tells you how much cash they keep on hand but durhams other numbers including borrowings as a % of income are also poor. Conversely what the hell are those HE providers doing with 430+ days liquidity, what crap management. Don’t they have an investment strategy.
I keep banging the drum about what a great uni Plymouth is and I have to say these financials make good viewing, sensible and manageable all round.

The sector is in worse shape financially than those latest HESA figures btw.

Is this a case of to big to fail?

No such thing - OfS or the other regulators aren't going to bail anyone out. They'd arrange short term credit if needed, and help plan for any mergers though - which would be what happens rather than a uni suddenly ceasing to trade.

Everyone at Durham is worried.

Public discussion about the University's financial situation will only make the problem worse and nobody at the University wants that.

Why are Durham in this situation? Is their model unsustainable or are they incompetent at managing what they have? (I mean beyond the general sector problems, why specifically them?)

My understanding re Durham is that they have a distributed leadership team with weaker central control. It has been unable or unwilling to take decisive action to address the structural issues that the operating environment has caused.

Let's be really clear. The vast majority of the issues are not because universities are badly run, or that staff aren't working hard enough. It's down to the conditions in which they have to operate in, which have been getting harder and harder for years.

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So ultimately student fees need to up signicantly at least in line with inflation? Alternatively can this government are now important foreign students are to the university business model?
Could an idea be for the state to make endowments as part of macro investment model and business could also contribute? For instance if the city are taking advantage of many well educated graduates can not some profit from the finacial sector be given to universites?

One fear I have is that universities are allowed to set their own fees if the funding crisis worsens and we will have system like the US where the best as I action goes to those with the deepest pockets. If we went to an open market system how much would an Oxbridge education cost? £50K per annum?

Similarly with Durham is students were asked to pay 20K per annum i.e. 60K per degree do you think in reality there may be students (home) willing to pay this often funded by families? Durham would effectively double their fee income and remove their deficit.

"Cities" don't have any money if you define them as the local government authorities that run them. Are you talking about in increasing taxation? Because we've just done that with employer national insurance and guess what - it's hit universities!

There are many ways in which the government can and should improve the higher education operating environment. As a country we spend far, far less on HE than the rest of the OECD*. But politically it is unpopular to give more money to HE. It's not a high priority for the voting public it seems.

The education secretary has promised radical change and that is what has to happen in order to avoid a messy collapse.

• some international comparisons are tricky due to how HE funding works in different countries.

Oh sorry - you said "the City" not cities.

I don't think I've met a government yet that has had the balls to tackle the inequality that financial services sector drives...

I'm sure some City companies would be happy to pay for a Business School - and many do make 'philanthropic' (tax deductible, looks good for the annual statement) donations. But sponsor a Humanities Faculty - no chance.

Is there a possibility that there would be an Open Market for Universities? Or even vastly increased fees?

I assume that Tuition fee loans would have to increase greatly to pay for this then. But then it is effectively paid for by the tax payer as only x% pay off the loan currently, and if the loan increased by a large amount, surely that % will then decrease a lot.

If there isn't loans, then the rich will go to Oxbridge and the poor won't go anywhere. Middle classes will go to remaining cheaper options. This would surely go against Labour's ideology.

Is there any possibility of large increases to fees for students already at university? Or these 'reforms' Bridget Philipson talked about .. It's very unfair to massively change the goal posts for someone who has already signed up and started paying for something (I don't include 25/26 increase in that- an increase inline with inflation isn't unreasonable).

Is there any possibility of large increases to fees for students already at university?

No. Uni terms and conditions will state what annual fee increases will be. In fact some uni's can't implement even the recent inflationary rise because their Ts and Cs didn't include such a statement.

The reform being talked about starting consulting on next summer is unlikely to be in place before 2027/8 simply because of the very long lead-in time of the undergrad application process.

I think the St Andrews and other top 20 universities of this world will be fine - very popular, massively over-subscribed, active and rich alumni cohort.. When many are offers are 3 A-stars you can see that the roll is not the issue.

The ones to watch are the newer universities, some of which have extraordinarily low offers in clearing, like CCD in Chemical Engineering that someone I know was offered (private school so no contextual overlay). An engineer I know said it’s actually challenging for most achieving those A levels to work in the field, let alone pass a decent uni course. (Illness and family issues etc. excluded).

We need to take a hard look at whether we need so many universities.

Our VC is pushing quite hard for this, and not just institutionally but subject too. So medicine will cost more than history for example. It will be a disaster for social mobility.

Taking medicine it would also be a disaster for the NHS. Doctors either to straight to private because or huge fees to pay off, or they are so privileged they have no sense of the lives they are treating.

And yet some of your 'top 20' high tariff are struggling financially, including St A, while some of your CCDs are awash with cash

Maybe read some of the links provided.

When you say "We need to take a hard look at whether we need so many universities" you're actually saying "we shouldn't give so many of our clever, talented people the opportunity for higher education".

We're the seventh wealthiest country in the world. We're living in an age of rapid technological change and massive global challenges. We need more education, not less.

Durham has a big building project on this year as they are renovating one college and, i believe, building a new one? (I might be wrong on that point, though). Surprised that would go ahead if they were in such financial difficulty? (Though obviously increases number of potential future students...)

Presumably that's why they've borrowed two thirds of their annual income? One of the highest borrowing ratios though, and not sure that explains very very low net liquidity days.

One factor which goes in favour of Oxford, Cambridge, Imperial, possibly LSE, is that their international profiles bring international students without agency fees having to be paid to attract them. Durham, York, Exeter and others typically pay millions every year in commissions to agents who bring them international students. The more intense the demand for these students, the more the agents can charge. Obviously it’s just one of many costs, but the universities do need to have really robust governance in the face of such tough challenges.

The University of Edinburgh’s running costs are an eye-watering £120 million - a month!

Uni of Edinburgh cuts

£1.385 bn income in 22/23 against costs of £1.228bn.

costs at £120m per month presumably for 23/24, or early months of 24/25 take that to £1.44bn for the year. As the article suggests income has not kept pace.

For context in 22/23 only three unis had a higher income than Edinburgh. But five a higher expenditure, though two of those were only marginally higher.

Fairly sure that Edinburgh is not generally considered a middle or lower ranked Uni. And yet…..

looks like those endowments and donations mentioned by another pp need a lot of work. £55m received by Edinburgh in 22/23 - barely covers two weeks of running costs. Whilst that £55m is way off the pace compared with Oxbridge it is higher than any other UK Uni after those two. And seven times more than St Andrews managed.

In terms of assets and liquidity... I know the Oxbridge collegiate system means that the sum of the independently financially managed colleges is far higher than that of the University (one Cambridge college alone has assets of over £2bn).

Does Durham's version of the collegiate system work in the same way, which would mean the figures might not be quite as catastrophic, or does it not?

No. The Oxford and Cambridge colleges are legally separate institutions. (London is the only other collegiate university in the UK - Wales was collegiate but I think has now dissolved).

Durham is one whole institution that includes all the colleges, as is Lancaster.