Universities at risk of going bust without major bailout, warns IFS

AROUND a dozen universities could be at risk of insolvency without a Government bailout amid the Covid-19 crisis, a new analysis suggests.

Research by the Institute for Fiscal Studies (IFS) suggests that the British institutions at greatest risk may need a targeted bailout costing £140m, or debt restructuring, to keep them “afloat” in the future.

An estimated 13 universities across the UK – which educate approximately 130,000 students – could end up with negative reserves by 2024 as a result of the pandemic, the analysis warns.

These institutions “may not be viable in the long run” if they are left without financial support, it adds.

The IFS report predicts that universities that were already in a weak financial position before the crisis hit, which tend to be less prestigious institutions, are more likely to face insolvency.

It estimates that long-run losses across the UK higher education sector could come in anywhere between £3bn and £19bn – or between 7.5% and nearly half of the sector’s overall income in one year.

The largest losses are likely to stem from falls in international student enrolments this year and increases in the deficits of university-sponsored pension schemes, the report says.

Universities are also expected to face lockdown-related losses of income from student accommodation and conference and catering operations, as well as financial losses on long-term investments.

The IFS research, funded by the Nuffield Foundation, concludes: “For around a dozen universities, insolvency is likely to become a very real prospect without a Government bailout.”

It adds that the Government response “will be critical in determining the future of these institutions.”

“Insolvency of a university could cause significant disruption to students’ education, potentially leaving them unable to complete their degrees,” the paper warns.

The briefing explores a series of options that the Government could take – including letting institutions become insolvent to “set a precedent” and show that it will not reward universities with the least resilient finances.

It adds that a “very tightly targeted bailout” of around £140m would help to avoid insolvencies at the worstaffected universities.

The researchers also warn that a more widespread bailout package could cost billions of pounds.