Open University posts £7m loss as student numbers slump

Distance learning institution and owner of FutureLearn describes results as 'disappointing' but 'not entirely unexpected'

March 3, 2016
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Hiccups: despite current woes, the OU remains in a ‘strong financial position’

The Open University has posted another multimillion-pound loss, as the collapse in part-time study continues apace.

The institution’s latest accounts, which were published recently, show that it ran up a £7.2 million deficit in 2014-15, on the back of a £16.9 million shortfall the year before.

This came as the total number of students signed up for OU courses fell by 13,449 (7.2 per cent) year-on-year, to 173,889. From a high of 260,119 learners in 2009-10, the OU has now shed a third of its enrolment in the space of six years.

The accounts describe the consecutive deficits as “disappointing”, but “not entirely unexpected”, as a result of the restrictions on student finance eligibility for part-time and returning learners that have led to falling part-time enrolment numbers across UK higher education.

The accounts do predict that the OU will make surpluses this year and next, and show that tuition fee income increased by £27.9 million year-on-year to £241 million, an increase of 13.1 per cent.

But this was largely offset by a £14.7 million drop in funding body grants, and increased expenditure, including a further £5.4 million investment in the “set-up phase” of FutureLearn, the OU’s platform for massive open online courses.

The OU had already pumped £7.3 million into FutureLearn in the previous two years, but the platform is said to be performing in line with its targets, with the aim of returning a profit to the university. Further OU investment in the venture of £13 million over three years was announced in November.

Elsewhere, the accounts reveal that Peter Horrocks, the OU’s vice-chancellor since May, started on a salary and benefits equivalent to £339,000 annually. This is a reduction compared with the previous vice-chancellor, Martin Bean, who received £412,000, including pension contributions worth £58,000, in his last full year in the job.

Mike Boxall, a higher education specialist at PA Consulting Group, said that the OU had been squeezed by a “double whammy” of the “catastrophe” in the part-time and postgraduate sectors, and the entry of other universities into the online learning marketplace.

“They have been hit by a market shift and competition for their core base,” Mr Boxall said. “It is quite challenging for them to stand back and say ‘how do we reposition ourselves against these trends’.”

Mr Boxall said that the gradual erosion of the three-year residential degree as the dominant model of higher education could “play to [the OU’s] strengths”, but warned that the university’s progress in this area was “not very visible yet”.

The results emerge while the OU remains locked in a dispute with the University and College Union over the closure of seven regional offices that has seen staff strike repeatedly.

An OU spokesman said that the university has “significant reserves and remains in a strong financial position”.

“The OU performed well above its financial targets for 10 years, returning a considerable surplus which we have been able to invest in adjusting for the new funding regime in England that was introduced from October 2012,” the spokesman said. “The small deficit reported in our latest financial statements represents just 2 per cent of total turnover, and we are on track to return to surplus this year in line with our business plan.”

The accounts also reveal that the OU is engaged in a VAT dispute with HM Revenue and Customs, to the value of £52.7 million. This relates to goods and services procured from a supplier between 1973 and 1994 and, while HMRC was ordered to hand over the money to the OU in 2013-14, it is now appealing that ruling.

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