Cash forecast causes alarm

December 21, 2001

English universities and colleges will almost break even next year but only by further increasing student-to-staff ratios, according to financial forecasts published this week.

The sector as a whole will make losses of £7 million, representing an operating deficit of less than 0.1 per cent. Some 50 institutions are forecasting losses, representing 38 per cent of the sector. The figures take into account the outcome of the 2000 spending review.

Capital spending is predicted to be considerably higher than earlier estimates. As funding was squeezed, institutions neglected their spending on infrastructure.

Institutions should be spending an extra £0 million a year if they are to meet the full costs of keeping their estates in good order, according to the funding council.

Universities and colleges are running short of ready money. The report warns: "The cash and liquid reserves held by the sector are modest. Net cash balances expressed in the number of days of expenditure are low. For the sector as a whole, these are only 13 days at July 31 2000, and are forecast to reduce further to 9 days at July 31 2005... These reductions will limit the financial flexibility available to some universities and colleges to manage unforeseen events."

The Higher Education Funding Council for England wants institutions to take action to minimise future financial risks. It is calling on universities and colleges to diversify their income streams; to charge the true price for research and other activities; to control recurrent spending; and to remove any duplication through increased collaboration.

The funding council examined institutions' corporate plans, which encompass mission statements, overall strategies and long-term objectives. Over four-fifths of institutions reported that they are either fully or mostly achieving their targets for widening participation. A small number reported a lack of progress.

The funding council also monitors progress made on learning and teaching strategies and on links with business and the community; both of these objectives were being met by most institutions.

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