Will it be at risk financially?

There is a current funding shortfall for the university which is anticipated to be £5.4 million and will be covered by a loan by Anglia Ruskin (capped at £6.5 million).

The university is expected to make a small surplus each year, resulting in a total profit of £311,150 by the end of 2030/31. However, it is acknowledged that the operating model is: “vulnerable to almost any level of reduction in income” and will not be enough to fund the university’s future growth. The key to making sure the university turns a profit is ensuring enough students sign up – with tuition fees expected to be £9,000 – while controlling costs. It was initially envisaged that 15 to 20 per cent of students would be taught on campus, but ARU’s model is for that figure to be 30 to 46 per cent, although the Covid-19 pandemic could reduce that figure.

To mitigate against any potential shortfall, the full business case says there is: “scope in the model for greater efficiencies in operational expenditure” and that staffing costs could be reduced.

The report highlights a number of other potential problems, noting that “the financial model is very sensitive to cost inflation” such as an increase in staff pay. For instance, only one per cent of income has been set aside for asset maintenance, far less than the five per cent which is: “more typical for higher education”. Increasing the budget for maintenance would potentially leave the need for further funding, while a failure to do so could lead to “deterioration” of the facilities. Another factor is that ARU is being leased the university on a 10-year rent-free deal, but this will be up for review at the end of the period.

The report states that rent payments after this period: “could result in a deficit”.

But on a more positive note, the report indicates that during the first decade there is contingency provision of around £1 million a year which “will be a critical tool for management of financial risk in the operation of the new university”.

It adds: “If the contingency is not required, it represents a potential opportunity to provide betterment to the financial model.”

The combined authority is also confident that the financial performance will be better than predicted in the report.

The full business case gives a mixed picture on the finances and notes that: “the sensitivity of the model to fluctuations in revenues is very high”. It makes it clear that careful management will be needed with operating costs very likely to change from what is currently forecast. It also reveals that there will be 26 students per member of staff, with full time academic staff paid on average £65,000 a year and professional services staff £35,000.

Funding of £12.5 million for the project has been secured from Local Growth Fund (Government) . The repayment strategy is through the potential sale of the LGF’s shares in the building to a commercial or institutional property investor.

An artist’s impression of how the new university building will look.