UK Universities Facing 'Financial Disaster', According To New Research
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Up to 13 British universities could be looking at ‘financial disaster’ due to the after-effects of the coronavirus pandemic, new research has revealed.
On top of the impact of fewer students enrolling, universities will also be hit by pension obligations and investment losses caused by the likely economic downturn, which will affect finances over the next four years the research found.
The IFS declined to name the 13 institutions most at risk, however it is those with the lowest reserves and smallest investments that are likely to need either a government bailout or other serious investment to survive.
The report states: “It is not the institutions with the largest Covid-related losses that are at the greatest risk of insolvency. Rather it is those, generally less prestigious, institutions that entered the crisis in a weak financial position and with little in the way of net assets, which are at greatest risk.”
One of the authors of the report, Elaine Drayton, said: “If the government wanted to avoid university insolvencies, by far the cheapest option would be a targeted bailout, which may cost just £140m.
“Rescuing failing institutions may weaken incentives for others to manage their finances prudently in the future. General increases in research funding avoid this problem but are unlikely to help the institutions that are most at risk, as few of them are research-active.”
And general secretary of the University and College Union (UCU), Jo Grady, said the IFS report represented even more bad news for students and staff in higher education.
She said: “Universities are already seeking to sack staff, with casual staff and those from black and minority ethnic backgrounds suffering the most. We need a comprehensive support package that protects jobs, preserves our academic capacity and guarantees all universities’ survival.”
The IFS projections are based on numerous factors including a 50% drop in the number of new international students and a similar decrease in the number of enrolments from the EU for the 2020/21 academic year, as well as a 10% reduction in UK enrolments too as students wait to see how the landscape changes over the next 12 months.
Other factors that are expected to feed into the pessimistic economic forecasting are the the downturn in financial markets and estimates that, on average, universities will have to increase their pension provisions by 25% while dealing with an expected 10% fall in investment income.
The IFS has also put forward two more scenarios. A ‘pessimistic’ outlook which predicts £19bn in lost income, thanks to a much greater drop-off in student enrolment and a more severe market downturn and an ‘optimistic’ scenario which would see a £3bn loss based on a 25% fall in international and EU enrolments and no additional pension provisions required.
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