Failed projects ‘mean banks less likely to lend to universities’

Big spending with limited results may further exacerbate UK universities’ funding challenges as banks become less prepared to lend to higher education institutions, a conference heard.

Ewart Keep, emeritus professor of education, training and skills at the University of Oxford, told delegates at the Independent Higher Education conference that banks were the “invisible funder and regulator” of UK universities, and said questions would be asked about big spending decisions made in past years.

“There will be officials in banks like Lloyds and Barclays who have lent institutions big sums of money – and I’m talking about hundreds of millions of pounds of building programmes, now – beginning to think, ‘Am I ever going to get paid back?’” Professor Keep said.

Consequently, “getting money out of banks for projects is going to be a lot harder in the future than it has been in the past”, said Professor Keep, who sits on the Scottish Funding Council board.

Some universities have faced questions over their decisions to open satellite campuses in London, including Sheffield Hallam University, which received criticism from its union for making voluntary redundancies at the same time as investing in an outpost in the capital.

And Professor Keep said universities would soon be asking “what went wrong” within senior management teams that green-lighted expensive investment projects.

“Senior management teams have been telling their courts and their governors for the last 10 years that you can always grow your way out of trouble” and that multimillion-pound London campuses would “pay back swiftly”. “But the chickens have come home to roost on some of that,” he said.

“There’s a real issue about how senior management teams are held to some account and certainly challenged by the broader governance arrangements. That’s a big issue in Scotland, and it will be a big issue, too, in England.”

Financial difficulties should be expected for at least another five years, said Philippa Pickford, director of regulation at the Office for Students.

Ms Pickford said: “I think the issues in higher education are more systemic in that I don’t think there’s something that’s going to change in the next four or five years that means that their financial challenges go away. There is a real need to respond, and make sure that there’s a sustainable future which might look different.”

Vivienne Stern, chief executive of Universities UK, added that universities needed to be realistic about what the financial challenges meant for the sector.

“What we cannot do is just cling on to the last remnants of a sector that we used to be proud of. That would be a disaster. We have to be able to reinvent and refresh and seek new opportunities to grow and do things better, and not just to prevent a silent decline,” Ms Stern said.

juliette.rowsell@timeshighereducation.com