Universities in ‘reasonable financial shape’ amid fears institutions could close

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English universities are in “reasonable financial shape” despite fears that some institutions could close amid the pandemic, the regulator has found.

Currently, there is a low chance of significant numbers of universities failing amid Covid-19 but uncertainties remain, the Office for Students (OfS) has said.

Britain’s exit from the EU and its impact on the recruitment of EU students could affect universities’ financial viability, according to the analysis.

Overall, the data shows that the sector is expecting to report broadly similar levels of income of £35 billion across all three years, with an expected decline in 2020-21 to below levels achieved in 2018-19.

At an aggregate level, institutions have forecast that tuition fee income from international students in 2020-21 will drop by 10.4% to £5.4 billion.

“Issues that could impact on income include higher numbers of students dropping out, reduced income from accommodation and conference facilities or impact of Covid-19 restrictions.”

It also notes that 2020-21 is the final year that EU students can enter English universities on the same fee and financial support terms as UK students.

The report says: “Aggregate EU tuition fee income has gradually declined since the 2016 referendum and in the run up to the UK’s exit from the EU.

“The detail of the UK’s future relationship with the EU will also have currently uncertain implications for other EU-related activities of the English higher education sector.”

The OfS analysis, based on financial data submitted by registered English institutions in October, says “the likelihood of multiple providers exiting the sector in a disorderly way due to financial failure is low at this time.”

But the watchdog will be closely monitoring a small group of providers amid concerns about short-term financial viability.

It comes after Institute for Fiscal Studies researchers suggested in July that around a dozen British universities could be at risk of insolvency without a Government bailout amid the Covid-19 crisis.

Nicola Dandridge, chief executive of the OfS, said: “The profound impact of the pandemic has caused significant disruption to students and universities and other higher education providers in the last nine months.

“However, at this stage, the effects of coronavirus on university finances are not as severe as was first feared, though there is significant variation between different universities.

“All of this means that English higher education finds itself in reasonable financial shape, and the grave predictions of dozens of university closures have not materialised.”

She added: “There are a number of uncertainties which will continue to affect finances both now and into the future, not least the fact that it is still not clear what the overall impact of the pandemic will be.”

University and College Union general secretary Jo Grady said: “Although much of the higher education sector has managed to weather the current storm we have seen some universities cutting staff during the pandemic.

“It is unacceptable to make anyone redundant in the middle of a public health crisis, especially when there is no financial justification.

“Universities need to focus on retaining staff so that students get the best possible teaching during the pandemic, and so higher education can lead our recovery from this crisis.”

A Universities UK spokeswoman said: “It is testament to our universities that, despite the challenging economic environment, including the impact of Covid-19, most universities remain in a stable financial position.

“This reflects swift action and difficult decisions being taken by universities to offset the increased costs of being Covid compliant.”

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