Universities at risk of falling short on investment

That is the warning from the Higher Education Funding Council for England, which says in a report on 2013-14 sector finances, published today, that without increased surpluses and continued government support such a risk is present.

The sector’s results from that year show “a financially sound position overall”, says the report, titled “Financial health of the higher education sector: financial results and TRAC outcomes 2013-14”.

The funding council also says that there “continue to be significant variations in the financial performance of individual institutions across the sector”. A chart in the report shows that two institutions saw their income fall by more than 10 per cent in in 2013-14, while four saw their income grow by more than 15 per cent.

In 2013-14, operating surpluses across the English sector totalled £992 million, equivalent to 3.9 per cent of income, Hefce says. This was up £49 million from the previous year, when surpluses were also equivalent to 3.9 per cent of income.

The funding council notes that capital investment rose in 2013-14, up 23 per cent to £3.25 billion. The higher tuition fees regime is widely seen to have led universities to spend heavily on capital in the hope that new facilities will attract students, just as public capital funding is declining.

Hefce says on capital spending: “To help fund this expenditure, the sector used £1,552 million from its own cash reserves (equivalent to 6.1 per cent of total income) and borrowed an additional £501 million.

“This caused total sector borrowing to rise to £6.7 billion at the end of July 2014 (equivalent to 26.3 per cent of income).”

The funding council continues: “Without increased surpluses and continued government support, there is a risk that the sector will be unable to deliver the scale of investment required to meet student demands, build capacity and ensure that the sector can remain internationally competitive.

“Government support also fosters confidence to others to continue to invest in the sector, including willingness of banks to lend money, although the sector’s capacity to lever in funding from other sources, including additional borrowing, is limited and may not be sufficient to meet the sector’s long-term investment needs.”

Hefce also says that “no institutions are currently close to the risk of insolvency”.

john.morgan@tesglobal.com