Universities UK: state bailout required to save institutions

Some UK universities could go bust unless they receive significant government support given the immense financial impact of the coronavirus shutdown, Universities UK has warned.

In a direct appeal to Rishi Sunak, the chancellor, and other senior cabinet ministers published on 10 April, the organisation said that “some universities will face financial failure, with severe impacts on their students, staff, local community and [the] regional economy” without “proactive support” from government.

“Others would come close [to failure] and be forced to reduce provision for students or to significantly scale back research activities and capacity,” added Universities UK, which said that the sector was facing losses in the region of £790 million from accommodation, catering and conference income, as well as additional spend to support students learning online, in the current 2019-20 academic year alone.

The potential impact on UK higher education in 2020-21 was also “extreme”, added Universities UK, saying that institutions were projecting a “significant fall in international students and a potential rise in undergraduate home student deferrals”.

A 100 per cent fall in international students will deny UK higher education £6.9 billion in income, it added.

Setting out a detailed list of proposals, which were endorsed by UUK’s board on 8 April, Alistair Jarvis, the group’s chief executive, said that the support would help ensure universities “remain able to weather the very serious financial challenges posed by Covid-19”.

“It will help to protect the student interest, to maintain research capacity, to prevent institutions failing and maintain the capacity to play a central role in the recovery of the economy and communities following the crisis,” said Mr Jarvis, who added that institutions “moving forward will act collectively and responsibly to promote sector-wide financial stability in these challenging times and help the country to get back on its feet and people to rebuild their lives”.

The specific measures proposed by UUK include a 100 per cent increase in quality-related research funding for 2020-21 – which would equate to about £2 billion annual uplift – and that the state funding agencies pay the full economic cost of research, rather than providing about 80 per cent of funding.

UUK also proposed a one-off return to student number controls for 2020-21 – with institutional caps frozen at 2019-20 levels, though a 5 per cent increase in undergraduate recruitment would be permitted.

It also called for “targeted support to protect and sustain courses that meet the national need for key public sector workers, maintain high-cost STEM provision and facilitate planned growth in 2020-21 and 2021-22 in key areas such as nursing, healthcare, medicine [and] teaching”. It also urged government to consider targeted support for small and specialist institutions, plus help for measures that aim to support retention and recruitment of students from disadvantaged backgrounds.

It also said that a “transformation fund” should be established to support universities over the next two to three years “to reshape and consolidate through federations and partnerships or potentially merge with other higher education institutions, further education colleges or private providers”.

More clarity on whether universities could access the government’s Job Retention Scheme, which would allow them to furlough staff on 80 per cent of their salary up to £2,500 a month, was required, while greater flexibility on student visas would also be needed, said Universities UK.

Its blueprint for the sector’s survival “provides a commitment to universities doing everything they can to reduce costs and further increase efficiency through strong actions such as recruitment freezes and new tighter controls on spending”, explained Universities UK, adding that “when paired with this package of government support it will mean the higher education sector can maintain capacity to play its vital part in the difficult period ahead for the nation”.

Welcoming the UUK plan, Tim Bradshaw, chief executive of the Russell Group, said that the “whole higher education sector – like almost all others in the UK – is at risk in these unprecedented times”.

“The financial situation for universities is complex, with everything from international student flows to charity and collaborative research income disrupted by the Covid-19 crisis,” said Dr Bradshaw.

“To secure long-term sustainability for students and for the UK’s vital research and innovation base, sector-wide financial support and stabilisation measures are needed,” he added, saying that the “right investment now will underpin the future growth and prosperity of the country”.

jack.grove@timeshighereducation.com