The University of Kent has reported an underlying deficit of £12 million for last year and expects an even bigger shortfall of over £30 million in the current year, citing an “unexpected downturn” in returning students amid the cost-of-living crisis and “post-pandemic learning”, plus a wider crisis in university funding.
Kent previously outlined proposals that would see it “phase out” courses in modern languages, philosophy and other areas in favour of growing provision in subjects such as law, business and computing, with up to 58 academic posts at risk of redundancy.
The university’s 2022-23 financial statements, published belatedly, now offer more detail on its financial issues, reporting a “significant underlying deficit of just over £12 million” and the raising of £30 million from a “lease and leaseback transaction” on one of its student residence properties.
Kent’s “statutory reported performance” for the year was a surplus of £4.9 million, but this included a one-off benefit from pension valuation movements of £16.1 million.
“Cost of living pressures have impacted our students, resulting in an unexpected downturn in the number of students returning to complete their studies after the summer 2022 break,” says the university’s annual review.
“This, coupled with ongoing fierce competition for new students, resulted in a year-on-year fall in student income of £2.4 million, and a shortfall against budgeted income for the year of £13.2 million.”
Meanwhile, despite cost-cutting measures, “global pressure on input prices, particularly resulting from the Ukraine war, meant that in some areas we were faced with cost increases that could not be contained or reduced, particularly in our energy costs and IT licences”.
“The university acknowledges that it can’t continue operating in a deficit position and as part of the university’s ongoing drive to ensure financial sustainability, work has been accelerated and enhanced, with the support of specialist advisers, to identify further opportunities to deliver efficiencies and to target areas of income growth,” the annual review also says.
While student retention for 2023-24 has “made a partial but significant recovery”, student recruitment “has proved more challenging, particularly for international students, and particularly at postgraduate level”, the annual review says.
The impact of returning the university to a “financially sustainable position” alongside the longer-term Kent 2030 transformation plan means that “the university has approved plans that see a deficit of c.£31 million in this coming year, as it starts to incur the costs and investment associated with the development and implementation of this transformation plan, followed by a turn-around into surplus as the plan takes effect”, it also says.
Kent has “reviewed its future outlook and the profile of risks it faces alongside its ability to mitigate these risks promptly to ensure banking covenants can be met,” the annual review says.
The annual review also describes the university as having “entered into a lease and leaseback transaction exchanging the leasehold on one of its student residence properties for £30.3 million”. But NatWest bank had “first ranking security over the property and agreed that £15.2 million of this sum [be] repaid to them to reduce the loan balance held with them, the remaining balance of £15.1 million being available for use by the university”.
The university has also undertaken a “rescheduling of its existing debt repayment profile, with the next capital repayment falling due in March 2026”.
Kent also highlights the impact of sector-wide funding problems, with England’s tuition fee cap having been set at £9,000 in 2012 – lifted to £9,250 in 2017 – but “now worth less than £6,500 at today’s values”, as high inflation has eroded its value.
“Furthermore,” continues the annual review, “higher than normal student attrition rates, likely due to post-pandemic learning, face-to-face exams and the cost-of-living crisis led to a drop in fee income for many HEIs and made the financial environment over this last year extremely challenging; Kent was no exception.”
A Kent spokeswoman said: “Like many in the sector, we face a number of financial challenges, including the fixed tuition fee, high inflation and changes in student behaviour. Our 2022-23 accounts continue to reflect this, although we have plans in place to address our underlying deficit and return to a surplus position in the years ahead.
“This includes ensuring the courses we offer match future student demand and embedding a number of changes over the past year to ensure we operate as efficiently as possible.”
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Following clarification by the University of Kent of an error in its financial statements, this article was updated to state that the projected deficit for 2023-24 is £31 million, not £13 million, as originally reported.
