English higher education ‘in reasonable financial shape’ despite impact of pandemic

The report finds that strong cash balances, increased but sustainable borrowing including through government-backed loans, and the fall in income from international students’ fees being less than feared, have combined to leave the sector in a reasonably stable financial position. The OfS’s analysis concludes that although there is currently a low chance of a significant number of unplanned closures of universities, colleges or other providers, there remain considerable uncertainties in the future.

The analysis is based on data returned to the OfS this October. In the return, universities forecast their financial performance and position in the financial years ended in 2020 (2019-20) and 2021 (2020-21), relative to the complete year prior to the coronavirus pandemic (2018-19). It provides the first opportunity to analyse the impact of the pandemic on English higher education.

The report finds:

• The aggregate data shows that the sector is expecting to report broadly similar levels of income of £35 billion across all three years, albeit with an expected decline in 2020-21 to below the levels achieved in 2018-19.
• In 2019-20 total higher education course fees were reported at £18.5 billion, an increase of 7.2 per cent compared with 2018-19 (£17.2 billion). Higher education providers have forecast that fee income will fall by 1.7 per cent in 2020-21, although this would still be above 2018-19 levels. 
• Total Non-EU (overseas) tuition fee income was reported at £6.0 billion in 2019-20, an increase of 16.4 per cent compared with 2018-19 (£5.2 billion) – consistent with strong growth in overseas fees in recent years. At an aggregate level, providers anticipate this to decrease by 10.4 per cent in 2020-21 to £5.4 billion.
• At the end of 2019-20, aggregate sector borrowing was £13.7 billion (equivalent to 38.4 per cent of income), a rise of £0.7 billion compared to 2018-19. Forecasts show that the sector is projecting aggregate borrowing to continue to rise to £14.2 billion by the end of 2020-21 (40.6 per cent of income). This is a slower increase in borrowing than in previous years.

Commenting, Nicola Dandridge, chief executive of the Office for Students, said:

‘The profound impact of the pandemic has caused significant disruption to students and universities and other higher education providers in the last nine months. However, at this stage, the effects of coronavirus on university finances are not as severe as was first feared, though there is significant variation between different universities.

‘There are many reasons for this relatively positive picture. Universities entered the pandemic in reasonably robust shape. England continues to be a popular destination for international students. And universities have been able to access significant support from the government, including via access to government-backed loans. All of this means that English higher education finds itself in reasonable financial shape, and the grave predictions of dozens of university closures have not materialised.

‘There are a number of uncertainties which will continue to affect finances both now and into the future, not least the fact that it is still not clear what the overall impact of the pandemic will be. Where universities have immediate concerns about their finances, they must let us know straight away. The OfS will work constructively with any university in financial difficulties, with our overarching priority being to protect the interests of students. At this point in time, though, we believe that the likelihood of significant numbers of universities or other higher education providers failing is low.’