Source: Getty
Keep looking: Optic Glyndwr makes mirrors for the European Southern Observatory, but is yet to make money for the university
Glyndwr University hit the headlines last month when it was singled out in the House of Commons by the immigration minister, James Brokenshire, for hosting more than 200 international students with “invalid” English language tests. Along with 57 private colleges, Glyndwr had its licence to sponsor such students suspended after an investigation into testing fraud.
It is not clear how long the suspension will last, but it is clearly a threat to the finances of the Wrexham-based institution. In 2012-13, tuition fees from full-time international students made up more than a fifth of its income.
But even before this latest blow, Glyndwr had already run into financial difficulties.
In 2012-13, the most recent year for which accounts are available, Glyndwr recorded a deficit of almost £4 million, nearly a tenth of its relatively small turnover. In March this year, it emerged that the university was considering plans to make nearly one in 10 staff redundant. The revelation triggered a vote of no confidence in the vice-chancellor, Michael Scott, by the University and College Union branch, which held him “directly responsible for the current financial circumstances”.
The deficit is not the only warning sign in the accounts. Glyndwr’s cash holdings, the lifeblood of any business, plummeted from nearly £3 million to £141,000, while its current liabilities were greater than its current assets. The university also agreed a bank overdraft, the accounts reveal.
The most recent publicly available governing board minutes, from 13 December 2013, reveal that the university has been “reporting on cash flow” to its bank and to the Higher Education Funding Council for Wales.
‘Strategic investment’ yet to pay off
One reason for the deficit in 2012-13 was a £900,000 loss made by one of the university’s subsidiary companies, Optic Glyndwr, whose main business is making mirrors for the huge telescopes of the European Southern Observatory.
The firm – originally called Optropreneurs – was bought by Glyndwr in 2009 from the Welsh government for a maximum of £1.5 million, dependent on turnover, which the first accounts of Optic Glyndwr say was to be paid in instalments.
Times Higher Education has seen the financial due diligence conducted on Optropreneurs by the firm Baker Tilly, which was submitted to the university in December 2008. It quotes trading projections made by Optropreneurs’ management that predict that the company would lose £415,000 in 2008 and 2009 combined, although it would return to profit in 2010.
But Baker Tilly ran two alternative financial scenarios to take account of the “significant number of uncertainties”. In both, Optic was projected to lose more than £2.2 million over the subsequent two years.
In the end, these more pessimistic assumptions proved more accurate: since purchase, the firm’s total losses have amounted to just over £2.5 million, according to Optic Glyndwr’s accounts since the university took it over.
Speaking to THE, Professor Scott said that the company had been an “incredible, incredible success” for the university, citing its breakthroughs in mirror polishing. It is a “strategic investment” for the future, he said.
Professor Scott has been vice-chancellor since Glyndwr won university status in 2008 (previously it was the North East Wales Institute of Higher Education, of which Professor Scott had been principal), and he spoke to THE in the week before the university lost its visa licence.
Another controversial decision for Glyndwr came in 2011, when the university bought Wrexham’s Racecourse Stadium for £1.8 million. Figures seen by THE show that in the three years since the deal, the stadium has cost more than £3 million, while bringing in nearly £580,000 from Wrexham Football Club from rental, hospitality and other sources.
The financial future of the site was in jeopardy before it was bought, and Professor Scott said that it would have been “terrible” for the community had it gone bankrupt. The purchase “has cemented the idea that this is the university for the north east of Wales”, he argued. The university could even create a new business and engineering school underneath the stadium stands, he said.
In 2011, Glyndwr also established a London outpost – now the capital’s biggest UK university branch campus with 1,705 students – by buying the private London School of Management and Science. The purchase price is unclear, but in 2012-13 the campus contributed £2.35 million to the parent university, the majority through a “royalty payment”, according to Glyndwr’s accounts.
Despite this significant profit, Glyndwr is embroiled in a legal dispute over a service agreement with the former owners of the London campus, with the LSMS seeking £3.8 million. There was an initial court hearing in London on 30 June.
Although the university did not comment on details of the dispute, one insider said that Glyndwr had agreed that the LSMS would be the sole recruitment agent for its London campus. In 2012-13, the accounts show, for every £7 the London campus was receiving in tuition fees, it was paying out £1 in “recruitment commission”.
Price points
But perhaps the main reason for Glyndwr’s deficit in 2012-13 was what some insiders at the university see as a major misjudgement over tuition fees.
For that year, Welsh universities, like those in England, had to set tuition fees of up to £9,000 a year. In contrast to England, Hefcw would pay Welsh students’ fees above £3,465, meaning that the pricing level would make little practical difference to Welsh students.
Glyndwr set relatively low average fees of £6,643 (all other Welsh universities set theirs above £8,500), meaning that its increased tuition fee income did not compensate for the simultaneous cut in teaching grant, leaving it with 20 per cent less income from Hefcw.
Professor Scott said that he had “absolutely” no regrets over the fees decision. He and the university think that the fee grant for Welsh students will one day be withdrawn, leaving students to pay up to £9,000 a year. “If you’ve set your fees high, it’s very difficult at that point to bring them down again,” he said.
Questions are now being asked about Glyndwr’s overall strategy, and not for the first time. In 2013, the Review of Higher Education Provision in North East Wales, the report of a group set up to look at options for the university’s future, found among those it interviewed the “widely held” view that the university had an “opportunistic approach to survival, not a broader strategy”.
david.matthews@tsleducation.com
