13 universities risk closure if they do not get a bailout

AT LEAST 13 universities are at risk of closure amid a financial black hole in the sector of up to £19billion due to the pandemic, research suggests.

They may need Government bailouts, debt restructuring or mergers to survive. And up to 20 universities could go to the wall if there is a significant second spike of the virus and the country goes back into prolonged lockdown.

The Institute for Fiscal Studies (IFS) has warned that ‘generally less prestigious institutions’ are at ‘greatest risk of insolvency’. This is because they ‘entered the crisis in a weak financial position and with little in the way of net assets’.

Around 130,000 students attend the 13 institutions most at risk.

The IFS report, funded by the Nuffield Foundation, says: ‘While there is no precedent for the liquidation of a publicly funded university in the UK, it is explicit Government policy that universities can fail.’ Institutions face ‘big losses’ from falls in enrolment, particularly of international students.

They are also set to lose income from student accommodation and conference and catering operations, as well as take a hit on long-term investments and increases in the deficits of universitysponsored pension schemes.

The IFS estimates a worst- case scenario of £19billion long-term losses in the sector – nearly half of the sector’s overall income in one year. Even the most likely situation would see losses of £11billion.

However, future survival depends on the balance sheet position before the crisis, rather than on predicted losses from Covid-19. The report says: ‘The institutions at the greatest risk tend to have smaller predicted losses, but have already entered the crisis in poor financial shape.’

Universities UK, the umbrella group for vice chancellors, has previously called for a multi-billion pound Government bailout for the sector.

Elaine Drayton, an IFS research economist, said ‘by far the cheapest option’ is a more targeted bailout of £140million to the 13 most vulnerable universities.

She added: ‘However, rescuing failing institutions may weaken incentives for others to manage their finances prudently in the future.’