Several universities in London will be tipped into deficit or pushed further into the red if the Westminster government proceeds with plans to scrap additional funding for institutions and students in the capital, a new report warns.
A study conducted by Frontier Economics for London Higher, which represents universities in the city, found that three institutions which had previously reported surpluses would have deficits if London weighting funding was removed. Meanwhile, four institutions’ surpluses would drop to £1 million or less as a result of the policy change, which was proposed by education secretary Gavin Williamson in January.
A further seven universities already have deficits and scrapping the London weighting funding “will push them further into the red”, according to the analysis, which used data from the Higher Education Statistics Agency.
The report highlights the significantly higher costs for London universities, including the fact they are contractually obliged to pay a London allowance to their academic staff, typically in excess of £3,000 per scholar. It says this allowance alone is likely to add at least £80 million to staff costs for London universities.
Other figures show that while London as a whole has a high share of international students, they are not evenly distributed. Five universities account for around half of all overseas students in London, while many have very low numbers of international students, indicating that “their ability to generate income from other sources in order to compensate for the [London weighting] removal is limited”.
The government has argued that providing additional funding for London universities only was “inconsistent” with its agenda to “level up” the English regions.
But Diana Beech, chief executive of London Higher, said that removing London weighting would “take away a lifeline for London’s universities” as the funding was essential for placing institutions in the capital “on an even playing field with universities elsewhere in England”.
She added that it was “nonsensical to implement a policy that levels down London” given the importance of universities in the city for attracting both domestic and international students. A report from the Higher Education Policy Institute, published in October, predicted that students in London and the surrounding area could account for almost half of an extra 350,000 places that may be required in England by 2035.
Dr Beech said that the worst-case scenario for some institutions would be “staff cuts, pay cuts and cuts to front-line services for students”.
The government’s proposal is for London weighting funding to be scrapped from the 2021-22 financial year, but Dr Beech said the “only feasible solution” would be to phase the cut over three to five years so the change was incremental and institutions could plan accordingly.
The Office for Students has launched a consultation on the change, which is due to close on 6 May. But Dr Beech said she was concerned about whether the regulator would have “time to consider the financial implications on all institutions” and therefore whether the scrapping of London weighting funding was “a done deal”, given that the funding allocation would be made in June.
