Hefce fears sector finances could be 'poorer than anticipated'

Universities will have a “sound” financial footing in 2014-15 but face risks to their income due to declining demand from home and international students, according to England's funding council.

November 6, 2012

Enrolments for this year are likely to be down, the Higher Education Funding Council for England said yesterday in a publication titled: ‘Financial health of the higher education sector: 2011-12 to 2014-15 forecasts’.

Figures from the Universities and Colleges Admissions Service and institutions “indicates that 2012-13 student demand is lower than forecast by the sector, and that some institutions are recruiting fewer students than expected,” Hefce said in a statement to accompany the report.

“This suggests that enrolments will also be down, and increases the risk that financial performance for these institutions will be poorer than anticipated,” it added.

The report says that based on forecasts submitted to Hefce by institutions in June "at an aggregate level, home and EU undergraduate student numbers are expected to fall by an average of 2.1 per cent".

The revocation in August of London Metropolitan University’s licence to sponsor international students could “adversely affect the reputation of UK higher education, leading to a decline in overseas applications,” Hefce warned.

“It is too early to predict whether this will in fact happen, but fees from overseas students are a significant source of income for many HEIs [higher education institutions], and for the economy more generally, so this is an important issue,” the statement said.

The council anticipated a “sharp”, temporary drop in budget surpluses as universities invest in their facilities and estates.

Surpluses should recover, but some institutions “will need to increase their surpluses beyond current levels in order to finance future capital investment and maintain their long-term sustainability,” Hefce said.

If surpluses do not increase, “there is a risk to the quality of higher education infrastructure, which will harm the long-term sustainability of the sector,” it said.

david.matthews@tsleducation.com

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