Some universities ‘make long-term loss’ on £9K fee students

Several UK universities have a shortfall of millions of pounds in the funding of domestic students even under the current system of charging more than £9,000 in tuition fees, according to a data analysis.

According to a report from the UK sector’s Financial Sustainability Strategy Group (FSSG), about 20 institutions, including both research- and teaching-intensive universities as well as specialist providers, are recovering less than 90 per cent of the full costs of such teaching.

The figures – which come against the backdrop of a government review that may call for the lowering of tuition fees in England – are striking because previous estimates of the extent to which universities are meeting their “full economic costs” have suggested that they largely break even on publicly funded students from the UK and other European Union nations.

But for the first time, the FSSG report breaks down figures for individual institutions, although names have been anonymised.

The data show that three research-intensive universities and one teaching-focused institution failed to recover at least £20 million of the full cost of teaching in the year examined, 2014-15, while another 11 had a shortfall of more than £5 million.

Such deficits on publicly funded teaching would tend to be plugged by income from international students, but the data show that several institutions had shortfalls even on this teaching activity as well. However, it is not known if these involve the same universities as those with a deficit on publicly funded students.

Overall, the FSSG report – Understanding the Impact of Income Cross-Flows on Financial Sustainability in the UK Higher Education Sector – confirms that the majority of universities fail to cover full economic costs, which includes an estimate of the money needed to sustain teaching and research properly in the future by, say, retraining staff or buying new equipment. This is mainly because of large deficits made on research.

The report warns that a government target to increase investment in research to 2.4 per cent of gross domestic product by 2027 “can only be delivered” if universities are allowed to cross-subsidise from other activities, such as teaching international students, unless research is fully funded.

But it also reiterates concerns that income from international students may still not be enough to sustain universities in the long term, given that it makes up only about 14 per cent of total revenue and is at risk from a downturn in recruitment.

The report says that international recruitment growth was “planned by most institutions that we visited” and more widely across the sector, but there “is a risk to financial sustainability of those institutions if the growth is not achieved”.

The study also draws attention to the risks to universities from any changes to funding from the government. It warns of the implications for research, while saying that “institutions may also have to curtail a number of outreach and community activities if funding is reduced and flexibilities in how funding can be used become more restricted”.

In a foreword to the report, University of Reading vice-chancellor Robert Van de Noort, who chaired a steering group overseeing the study, says that recent attention on “value for money” for students showed a “lack of understanding of how and why universities fund the wide range of activities they undertake”.

He adds that the data in the study carry an implicit warning that any attempt to limit cross-subsidisation in universities could have consequences “which are unpredictable and some of which might damage the global standing of UK universities”.

simon.baker@timeshighereducation.com