Open University posts £25 million deficit as recruitment drops

The Open University has recorded a £25 million operating deficit, citing lower than expected student numbers with the cost-of-living crisis a factor, as some other, larger universities also report deficits amid a bleak financial climate for the English sector.

Universities have been publishing their 2022-23 financial statements at a time of a funding crisis combining real-terms cuts in funding for domestic students under the frozen fee cap with early signs of a fall in overseas student numbers.

The OU, a distance learning university with about 150,000 students, reported that it went above an agreed deficit budget of £10.4 million.

The OU’s financial statements say: “The adjusted operating deficit of £25.1 million reflects the reduction in income as we did not achieve the original target student numbers at the October 2022 registration. The cost-of-living crisis and student behaviours post-pandemic meant a reversal of the growth in student numbers seen in recent years. As a result, we have focused our efforts on cost reduction and income diversification activity.”

The financial statements also say that “underlying student numbers are now expected to fall again in 2023-24”.

In June 2023, the OU announced that it was planning to build a new campus in the centre of its home city of Milton Keynes, a move that would see it offer courses taught in person as well as online.

“Our financial results this year reflect the impact of reduced student numbers recruited in October 2022 and the efforts we have been making to ensure our financial stability in the coming years,” an OU spokesperson said. “Throughout 2023, we undertook a series of measures to reduce spend, while planning our return to an adjusted operating surplus by 2024-25, without reducing the quality of our student experience.”

The university recorded an “accounting surplus” of £19.9 million, once “a credit for the reduction of our Universities Superannuation Scheme pension provision, strategic change expenditure and other non-day-to-day items” were taken into account, the spokesperson added.

Elsewhere, Coventry University warned that it would need to make £95 million in cuts over the course of 2023-24 and 2024-25. “The UK government’s response to issues around migration and the economy in recent months has had an impact on the group’s recruitment of international students,” according to the institution’s financial statements.

Reporting a 2022-23 deficit of £2.4 million, Coventry also highlights “considerations” around its banking covenants – conditions on financial performance agreed with lenders, potential breach of which would affect an organisation’s ability to describe itself in its accounts as a “going concern”, able to meet its financial liabilities over the next 12 months.

“These considerations”, say Coventry’s financial statements, “have highlighted risks in respect of going concern arising from cash balances available to pay liabilities as they fall due and covenant forecasts which indicate the risk of breaching one of the debt covenants in relation to the group’s borrowings.”

However, while the university’s board of governors “acknowledges that uncertainty exists”, it “does not consider this to be material uncertainty that would cast doubt on the group’s ability to continue as a going concern”, the financial statements say.

The University of Wolverhampton reported a group deficit of £11.9 million, compared with a £27.8 million deficit the previous year. The university’s financial position had “improved significantly in the last year but still remains a challenge”, its financial statements say.

Leeds Beckett University reported a deficit of £8 million, but says in its financial statements that performance had been “robust”, with an underlying operating surplus of £900,000, once “non-cash pension charges that are sensitive to the performance of financial markets” were excluded, along with restructuring costs.

john.morgan@timeshighereducation.com