English university shortfall on research costs nears £5 billion

Annual Transparent Approach to Costing data shows returns on international students fell again last year

July 5, 2024
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Universities across England and Northern Ireland lost even more money in their research activity last year, racking up a deficit of more than £4.6 billion, according to a report.

The Transparent Approach to Costing (Trac) is an annual activity-based costing system that shows how much universities recover from certain economic outlays.

Published by the Office for Students (OfS), this year’s Trac report shows that English and Northern Irish providers posted a £4.6 billion deficit in research activity for 2022-23 – up from a £4.3 billion deficit the year before.

The institutions recovered just 68.4 per cent of their total economic costs on research last year. This was a slight improvement on 2021-22, but much less than in 2010-11 when the recovery rate peaked at 77.8 per cent.

The OfS said the trend in deficits reflected the “increases in operating costs due to increases in staff costs including pension costs and inflationary increases in other operating expenses, particularly estates and research facilities”.

According to the report, providers failed to recover their research costs across all types of sponsor. At just 16.8 per cent of full economic costs, the proportion recovered was lowest in institution own-funded research – but highest in activity sponsored by industry (76.8 per cent).

Elite (type A) UK institutions were the least affected by the research deficit, but still recovered just 73.5 per cent of their total economic costs. In contrast, the 15 universities in group D made back just 42.8 per cent in research.

International students continued to be the best way for these campuses to make their money back. The Trac data show that the returns on non-publicly funded teaching fell again slightly last year – from a 47.8 per cent surplus to 44 per cent.

Experts warned last year that a fall in the number of UK students means that direct teaching costs will have shifted towards international students.

The OfS warns that, despite the growth and “significant contribution” from international students, income from this section is not “sufficient to off-set the deficits across the other activity categories”.

Meanwhile the return on home students rose to a 9.6 per cent deficit – up from 6.1 per cent in 2021-22.

Overall, universities in England and Northern Ireland recorded an aggregate deficit of £2.8 billion, recovering 93.7 per cent of their full economic costs. This compares with a deficit of £1.9 billion and a recovery of 95.2 per cent in 2021-22.

The OfS partly attributes this to increases in pension costs, expenditure associated with the return to on-campus activity after the pandemic and previously deferred activity, as well as the impact of inflation on operating costs.

“Increases in staff costs and pensions, operating costs including energy costs and higher interest rates on financing were significant factors in 2022-23,” the regulator adds.


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Reader's comments (3)

It used to be a normal part of accounting for R&D, that when research costs were recoverable - according to various criteria - they were reclassified as development.
I just hope this trend doesn't mean universities become primarily educational establishments instead of primarily scientific research establishments. No point anyway since that would simply be duplicating schools and colleges. Take research away from universities, and there is no point in them.
As per previous comment, it is completely meaningless to spilt the cost recovery of research from teaching activities at Universities. The power of Universities to attract students is related to their research credentials. This deficit recorded under the research heading generates profit under the teaching heading.