University finances vulnerable as reliance on fees grows

Four in 10 UK universities now rely on tuition fee revenue for more than two-thirds of their total income, a new analysis reveals.

Times Higher Education’s annual look at the fiscal health of the country’s universities triggered warnings that institutions could face financial failure if they struggle in the more competitive recruitment environment emerging in the wake of the teaching excellence framework and the UK’s vote to leave the European Union.

According to 2015-16 financial figures, analysed from Higher Education Statistics Agency data with the help of accounting firm Grant Thornton, 42 per cent of UK universities now rely on tuition fees for more than two-thirds of their income. For 22 institutions, fees accounted for more than three-quarters of total income.

This heavy reliance on fees meant that institutions that struggled to recruit last year also saw their overall income fall, as they potentially struggled to plug the gap from elsewhere.

THE identified nine universities where real-terms income and revenue from fees both fell by more than 2 per cent. Four of them – Aberystwyth, Robert Gordon and Glasgow Caledonian universities, and the University of East London – were also among seven universities that registered deficits of more than 4 per cent in 2015-16.

One group of institutions that might be viewing student recruitment with trepidation over the next year consists of those that depend heavily on fee income and ended up with a bronze rating in the TEF.

Jenny Brown, chief not-for-profit operating officer at Grant Thornton, said that it was far too early to know how the TEF would affect the sector. But she predicted that it “really kicks in” for universities that were already struggling to stand out from the pack.

Ms Brown said that a number of institutions had attempted to distinguish themselves after the abolition of student number controls in England by highlighting the teaching and support that they provide. “The issue for these universities is that if they don’t get a good TEF rating as well, then it becomes problematic,” she said.

Julie Mercer, global head of education at professional services firm Deloitte, said that “a very clear stratification in the university landscape” was beginning to emerge, and it was “being reinforced by recent changes such as the latest TEF results and the impact of Brexit”. 

“Mission group no longer determines your position in rankings or your ability to attract students. We are now seeing a multi-tier university system where performance in the TEF is having a big impact on attractiveness, particularly for international students,” she said.

Ms Mercer said that there were other more global-facing universities where TEF results would be less of an issue but where concerns around Brexit’s impact on student and staff recruitment would be more acute.

simon.baker@timeshighereducation.com