Shared savings plan to halve admin costs

London Metropolitan University is set to cut its administration costs by up to 50 per cent by sharing services with other institutions, bringing "some staff losses and some staff gains".

January 5, 2012

The university announced the transformation after governors agreed on 21 December to redesign support services.

It has identified more than 70 different areas, such as payroll, procurement and careers, that could be made more efficient over the next five years by collaborating with other London-based institutions.

The proposed changes follow chancellor George Osborne's Autumn Statement on 29 November, which announced the removal of the 20 per cent VAT surcharge on shared services between VAT-exempt bodies.

This tax made it prohibitive for universities to share back-office functions, vice-chancellors had argued.

Malcolm Gillies, vice-chancellor of London Met, said that the university "aims to reduce its support-service costs over the coming five years by up to 40 to 50 per cent".

Professor Gillies, who is chairman of London Higher, which represents more than 40 London-based higher education institutions, added: "If every university tendered together for insurance, payroll or careers, you can see that would drive lower unit costs."

He said that "a lot of universities" are asking how they can do the same.

"There may be some staff losses and some staff gains, but if you run it into shared services, you grow a business."

Administrative support services cost the UK higher education sector £10 billion a year, Professor Gillies said, and the bill for London institutions is close to £2 billion.

The administrative shake-up follows radical action by London Met in response to the government's changes to undergraduate tuition fees and funding.

It reduced its course offering by 70 per cent to focus on high-demand areas such as business, while setting some undergraduate tuition fees for 2012 as low as £4,500.

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