Leadership

Regulating the Financial Sustainability of Higher Education Providers in England

As at December 2021, the OfS had made 10 providers subject to enhanced monitoring because of concerns about increased risk to their financial viability.

This report by the National Audit Office focuses on the OfS’s responsibilities to protect students’ interests from the consequences of financial risk in higher education providers.

According to the report, universities' finances proved more resilient during the COVID-19 pandemic than had been feared - but challenges remain in the medium-and long-term. Should higher education providers become financially unsustainable or unviable, students would be adversely affected in terms of a high-quality experience, making sure they can progress into employment or further study, and ensuring they receive value for money. The COVID-19 pandemic added to existing financial stress in the sector.

The proportion of higher education providers with an in-year deficit increased from 5% in 2015/16, to 32% in 2019/20. During 2020/21, 33 out of 247 providers (13%) had forecast that, by the end of the year, they would not have enough money to continue to fund at least 30 days' expenditure from their cash or credit facilities.

Short-term financial risks in the higher education sector are dominated by the COVID-19 pandemic, but medium- and long-term risks are more deep-seated. The pandemic meant higher education providers had to invest in new ways of teaching, while dealing with risks that they would lose income from a fall in international student fees, conferences, accommodation and research.

Some providers are highly dependent on fees paid by international students and face financial risks that pre-date the pandemic. In addition, valuations of pension schemes (particularly the Universities Superannuation Scheme) indicate that higher employer contributions will be needed.

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