Third of UK universities post deficits but cash flow improves

Almost a third of UK universities have reported deficits so far this year, though analysis suggests that the sector is making more money from its operating activities in a sign that the financial situation may be improving.

In Times Higher Education’s analysis of the accounts of 104 institutions that are members Universities UK released for 2024-25 so far, 30 have operating deficits – 29 per cent of the total. This was the same proportion as last year, and up from 23 per cent in 2022-23.

Among the institutions in deficit, the total loss has increased from £300 million to £365.7 million over the past year, and the average deficit has also crept up slightly.

The largest of these by some distance is Coventry University, which recorded a pre-tax deficit of £59.3 million – just as it did the year before. Its accounts said this was largely caused by a significant jump in recruitment agency fees after an increase in student numbers in May.

Meanwhile, Queen’s University Belfast, the University of Sussex, the University of East Anglia, Ulster University, the University of Derby and De Montfort University all have recorded deficits of between £20 and £23 million.

Many have blamed a decline in international student numbers and the subsequent increased competition for domestic students.

THE’s analysis uses the metric that each institution defines as its key measure for operating performance, though there may be differences between each.

“Given the precarious state some universities are in, this must be very worrying for some,” Martine Garland, formerly a lecturer in marketing at Aberystwyth Business School, told THE.

“It shows the depth of the problem and that there are no easy fixes – the current model just doesn’t work.”

Analysis shows that the 104 universities generated £2.3 billion in net cash from their operating activities – an 87 per cent jump from the £1.2 billion in 2023-24 but still less than half the levels of 2021-22.

Less than 10 per cent of the group had a negative net cash flow from operations – which was half the proportion among this group from 2023-24.

Garland said a possible reason for universities having operating deficits but positive cash generation was to do with high-value non-cash items appearing in expenditure statements such as depreciation.

“Given the sector has undertaken an extensive capital building programme over recent years, it’s probably not too surprising that depreciation costs may be high.”

The largest cash outflows were at QUB (-£33.5 million), the Open University (-£30.5 million) and the University of Bedfordshire (-£26 million).

Matt Atkinson, a former university chief operating officer who is now managing director of restructuring and turnaround at Alvarez and Marsal, said the analysis showed a continued deterioration in the financial health of the sector.

“Even with indexation, a UK undergraduate pays about £6,000 per year at 2010 prices. For universities whose core activities are teaching home students and undertaking some research that does not achieve full cost recovery, it is becoming more difficult to generate surplus.

“At the same time, the cost of studying continues to rise, while students’ preferences about what and how they want to study are changing.”

A third of universities generated less cash in 2024-25 than they did the year before – a big improvement from 72 per cent who did the same in 2023-24.

On average, institutions produced £14.8 million net cash each from operating activities – up from £7.7 million in 2023-24 but well below the £31.9 million of 2021-22.

Atkinson said the financial statements suggest that some universities have been covering their bills using short-term funds rather than long-term savings.

“In any event, cash flow generated from operating activities is required to fund debt service and capital expenditure, both of which are significant cash outflows. The level of capital expenditure spend is another key lever for universities in managing cash, however deferring upgrades and investment might not be sustainable in the longer term.”

THE’s analysis has already found that universities spent more than £300 million on severance pay last year, cutting more than 13,000 jobs in the process.

patrick.jack@timeshighereducation.com