England’s most selective universities were expecting the highest borrowing levels and biggest deficits this year, according to the industry’s higher education regulator’s latest financial report.
According to the report of the Students Office, higher-rate institutions predicted borrowing would reach nearly 45% of their income for 2020-2021 while deficits reached over 1% of income, even after adjusting for the effect of pension plan commitments.
However, the report says that, overall, all types of institutions expected a rebound over the next few years, supported by strong growth in the recruitment of domestic and non-EU international students.
“Overall, the short-term financial health of higher education providers in England is reasonable at an overall level,” the report says, adding that universities “have seen higher student recruitment in 2020-2021. that many had predicted at the height of the pandemic.
“The industry forecasts a decline in financial performance and strength in 2020-21, compared to 2019-2020, followed by a slow recovery expected from 2021-22.”
According to the report, the industry still faces uncertainties such as continued restrictions on the movement of students nationally and internationally due to Covid, “a higher number of students dropping out and a reduction in income from business activities. ‘accommodation and business that are based on open buildings and facilities.
The regulator was also “monitoring more closely how a small number of suppliers are addressing the challenges of their financial viability and sustainability. However, we consider that at present, the likelihood of multiple providers leaving the industry in a disorderly fashion due to financial failure is low. “
The sector’s overall revenues are expected to grow from £ 34.7bn in 2018-19 to £ 40.7bn in 2023-24, with the total number of students expected to increase by 12.3% between 2020-2021 and 2024-25.
The recruitment of full-time undergraduate students in the UK is expected to increase by around 124,000 students over the next few years as the 18-year-old population begins to rise after years of decline. For non-EU international students, forecasts indicate that there will be over 90,000 additional full-time equivalent (FTE) enrollments through 2024-25, a 30% increase.
At the same time, universities expected EU recruitment to fall by 35% over the period, representing 40,000 FTE students, thanks to the end of this year the same fees and funding arrangements than their British counterparts.
Overall, universities did not expect this to affect their bottom line, as EU student fee income is only expected to fall by 1.1% for the sector between 2020-2021 and 2024 -25, which “indicates an expected increase in fees per student”. said the report.
But this masks a “mixed picture” among different types of universities, with low-cost providers in particular estimating European student incomes to fall by 40%.
“The middle average tariffs and the weak middle groups forecast a decline in EU royalty income over the forecast period. All other groups expect an increase in income from EU tuition fees, indicating a higher level of confidence that European students will be willing to pay higher fees for their courses, ”the report.
Nolan Smith, director of resources and finance at OfS, said aggregate financial data showed “continuing evidence that the higher education sector as a whole is well positioned to recover from the pandemic.”
But, he added, it was “important to recognize that, although this is a set of positive projections, a number of factors could continue to affect the financial performance of universities in the years to come. come”.
“The pandemic – and the potential for future disruptions – continues to cause significant uncertainty as many sources of revenue for universities require fully open campuses,” he said.
“A number of other economic factors could present opportunities and challenges as the country recovers from the financial impact of the pandemic. And the prospect of increased pension contributions could pose significant financial challenges for some higher education providers. “
On this last point, the report warns that “the sustainability of pension systems continues to be a major concern”.
“Defined benefit and defined contribution pension plans have required increased contributions from employers and affiliates to support their sustainability. This trend is expected to largely continue over the forecast period and presents a potentially significant financial challenge for some higher education providers, ”he says.