The financial health of higher education

England’s funding Council, HEFCE, recently release its annual report on the financial health of universities. It found that most were in a sound position. However, it also found that financial stability and robustness were not enjoyed by all institutions; some are in a difficult financial position. The report also highlights some of the problems faced in universities that have over recent years under-invested in capital infrastructure. And it sounds a pessimistic note on the future: the English higher education sector may have to anticipate ‘lower surpluses, a fall in cash levels and a rise in borrowing’.

England is not alone in this situation – similar warnings have been sounded in the United States.

One of the problems is that, after all the changes in the institutional landscape and its regulation, the business model of universities has not changed – but whether this traditional model is still sustainable is less clear. If your income is largely based on public money you may experience difficult times when government itself must tighten its belt, but you may tell yourself that your consolation is that your paymaster is predictable and reliable and that, generally, income fluctuations are not extreme. But the experience all over the developed world has been that the state is finding it increasingly hard to meet its obligations to higher education, so that a financially healthy sector may need to target other revenues much more ambitiously.

In the meantime we will need to see how (or whether) universities with an increasingly tricky balance sheet can remain sustainable. There are many who now predict that the next few years will see universities having to close; that would create a very different higher education narrative.

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3 Comments on “The financial health of higher education”

  1. Vincent Says:

    At the moment you are in the very worst of all possible worlds. Micromanaged by civil servants, a gigantic and growing pensions bill and limited growth possibilities. You have a model from the middle ages that assumes no real income is needed until ones 30s if not 40s. A bit like with the medical community when the baby doc’s were expected to hit 100 hours a week to pay their dues. Basically a clerical apprenticeship. You are caught by too fast moving developments in the tech sector overtaking your carefully Established courses.
    The only area of income you’ve got that’s reasonably stable is the Arts, and all are abusing them and stripping then out to feed the science and tech bods.

  2. paulmartin42 Says:

    (1) Input units that are generally positive, young, enthusiastic etc etc (poorer quality ones helped by FE sector)
    (2) Substantial easy $; more is always nice but difficult to justify if staff not talented enough
    (3) Steady stream of new buildings – certainly in Scotland

    Does not seem like a tough job to me compared to some other front lines

  3. anna notaro Says:

    “One of the problems is that, after all the changes in the institutional landscape and its regulation, the business model of universities has not changed – but whether this traditional model is still sustainable is less clear.”
    I am not sure I agree with the statement that the business model of universities has not changed, quite to the contrary it has undergone dramatic changes, especially in England, and in the US (see the University of California following state funding restrictions). More precisely, the business model of universities has been ‘disrupted’ by the promises of marketisation, as Stefan Popenici writes in his most recent blog post
    I don’t agree with everything Popenici has to say on the topic, I don’t suffer from ideological totemism, the ‘market’ is not my enemy as I still believe that each university must create the best partnership agreements with the private sector to carry out specific aspects of its mission, however the question is whether the market forces and in particular economic benchmarks and financial drivers should be the fundamental drivers of change and/or policy. There is a strident contrast between the short-term focus of financial metrics and the long-term focus of educational outcomes which no university business plan should ignore.
    Where I agree with Popenici is in assessing the risks to democracy within academia that a certain brand of managerialism has produced (good governance being key to avoid such perils) and in his overall conclusion that “It is important to re-think now what is a university and what makes it different from any other profit-making endeavour. Rebuilding the sector can start from here. We can involve students and academics in decisions in reality, rather than mimicking it. We can stop counting meaningless stuff and sanction mediocrity, rather than celebrating it. Most importantly, we have to take a take a good look at what stands at the core of universitas and academia and change with courage and wisdom.”

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