‘Unrealistic’ universities could go bust
Experts’ damning verdict on campus finances:
UNIVERSITIES risk going bust due to ‘over-ambitious’ recruitment targets, a stark finance report warns.
The higher education watchdog said institutions have made unrealistic forecasts that the numbers of UK and foreign students will continue to rocket.
The Office for Students also warned those guilty of poor planning would not be bailed out by the taxpayer.
The expectation that greater numbers will keep coming to campus is at odds with Britain’s shifting age demographics, with the number of 18-yearolds set to fall steadily until 2020.
Hopes for more foreign students also fail to reflect uncertainty around Brexit, or any changes in immigration policy which follow.
The OfS issued its warnings after tracking the financial data of 183 English universities and other higher education providers. It found the institutions are in ‘reasonable financial health’, but the general picture ‘masks considerable variations in financial performance’.
Last summer 13 institutions reported ‘liquidity’ of less than 20 days, leaving them with less leeway to cope with emergencies.
The OfS stressed that growth forecasts for student numbers and related fee income are ‘likely to be unachievable’.
Overall, the sector is hoping for a 10 per cent rise in student numbers over the next four years – equivalent to an increase of 171,000 full-time students across England.
The figure includes an influx of around 78,000 full-time UK and EU undergraduates.
This is despite the fact that Britain’s population of 18-yearolds is predicted to drop by 5 per cent in the same period. After 2020 the numbers will start to rise again, but there will still be around 41,000 fewer 18year-olds in 2021 than in 2017.
International student numbers are forecast to grow by 56,000 in four years, with income from their fees projected to rise by £1.7billion, or 37.9 per cent – suggesting an ‘anticipated increase’ in average charges, the report says. International students already pay as much as £35,000 for undergraduate degrees.
The OfS report said the predictions show a ‘ significant level of over-ambition across the sector’, adding: ‘A provider whose financial viability and sustainability is underpinned by reliance on fee income based on student recruitment targets which prove to be unrealistic is exposing itself to significant risk.’
Sir Michael Barber, chairman of the OfS, said universities must ‘look at student numbers realistically rather than overoptimistically’, and added: ‘It remains our position that we will not bail out universities or other higher education providers facing financial failure.’
It emerged in November that a UK university was given an emergency loan of almost £1million by the OfS – but the regulator stressed this support is no longer possible under new rules. Overall, university surpluses fell from £1.12billion in 2016-17 to £1.02billion in 2017-18. The sector reported borrowing of £12billion, equivalent to 36.8 per cent of income and £2.1billion more than the previous year.
The Department for Education yesterday welcomed the report showing universities are in ‘reasonable financial health’, but said ‘protection plans’ were required in the event of closures.
Universities UK said: ‘This report highlights universities are operating in a challenging environment with increased competition, a freeze in tuition fees and increased cost pressures.’
‘We will not bail them out’