OfS’ new emphasis on financial sustainability welcomed

The Office for Students’ (OfS) decision to support universities’ “financial sustainability” in light of the coronavirus crisis has been welcomed as “apt” and “sensible” by sector leaders who believe the episode may lead to a “recalibrated attitude” towards institutions.

In what is viewed as a departure from its previous policy of refusing to prop up higher education institutions in economic distress, England’s higher education regulator informed the sector last week that it would act to “support financial sustainability” during and after the pandemic, opening the door to potential bailouts of heavily affected institutions.

In a letter to institutions on 17 March, Susan Lapworth, director of competition and registration at the OfS, said the agency would seek to “minimise long-run disruption to the English higher education system [by] reducing permanent damage and laying the foundations for the sector to recover as quickly as possible”.

Greg Walker, chief executive at the MillionPlus group of universities, said the OfS’ “new emphasis” on financial sustainability was “apt at this unprecedented time”.

“Universities have reserves that they have built up for contingencies and future investments, but these can become easily stretched by unpredictable one-off financial shocks of this kind,” said Dr Walker.

Although universities were not at “imminent risk”, Dr Walker continued, “cash flow issues are especially important as these can quickly create major challenges for institutions”.

He also welcomed the OfS’ stated intention to provide “more detailed guidance” on its regulatory requirements, “including a reduced requirement for reportable events” – an area on which providers have faced uncertainty over what should be declared.

“It is clearly in the interest of students that any financial ramifications of the virus are addressed with providers in a cooperative and flexible manner, with early indications being given to them as to how the regulator may treat such issues if they arise,” Dr Walker said.

Nick Hillman, director of the Higher Education Policy Institute, also welcomed the “recalibrated attitude” towards institutions.

“It is a very sensible letter,” said Mr Hillman, who added that “the tone was right, and the commitment to provide more information was also right”.

On the potential to help institutions financially, Mr Hillman said it was “absolutely right that universities are not left to fall over in the current crisis…At the end of the crisis, universities will be even more important if towns and cities see staff laid off, companies go bust and civic institutions are hampered in what they can do.

“Universities should not get special treatment, but should get the same treatment as other sectors [claiming financial assistance],” continued Mr Hillman, adding that there were a “lot of things that the OfS could do beyond just handing out tens of millions of pounds, including bridging loans or loan guarantees”.

“The OfS will make sure it has a ‘good crisis’…otherwise its own future could be in question,” he added.

jack.grove@timeshighereducation.com