UK to cash in on popularity as a destination for study

Cash from overseas students is expected to rocket over the next three years, new figures reveal this week. But the rise in students numbers will not be matched by an increase in staffing, writes Alison Goddard.

A survey of all English universities by the Higher Education Funding Council for England found that overseas fee income is set to rise by 39 per cent over the four years to 2006-07 as student numbers increase. It would mean total overseas income rising to about £1.3 billion.

This will also be the first year in which universities can count on top-up fee income from British and European Union students, if the higher education bill is passed.

The research picture is also rosy. Income from research grants and contracts is forecast to increase by about 6 per cent a year between 2002-03 and 2006-07, according to the funding council's financial forecasts.

But there are problems in store for the teaching budget. Staff numbers are forecast to increase by 3.6 per cent over the period, but the increase in total student numbers is projected to be far larger at 10.7 per cent.

Overall, universities are set to generate a surplus of 0.5 per cent of total income over the period studied, cash that should provide for reinvestment and future developments. Cash from exceptional items such as spin-off companies is topping up this income.

Yet despite the overall surplus, many institutions are still forecasting operating losses for the period surveyed. Some 50 institutions expect to have lost money in 2002-03, falling to 26 institutions in 2006-07.

The funding council appears pleased with the projections, which it says have been prepared on "broadly reasonable assumptions".

But, according to Hefce, institutions faced a wide range of financial risks that needed to be managed.

Institutions have identified action points to ensure continued financial viability. These include: improved cost efficiency; increased income generation through improved use of assets; and improvements in management information and management processes.

The funding council also asked for institutions to make progress reports against their strategic aims. For 2002-03, some 97 per cent of reports were deemed to be satisfactory or exemplary. Only in 3 per cent of cases were activities and progress judged to be poor.

RISK FACTORS

Financial risks most often identified by institutions:

* An underrecruitment of UK and European Union students or failure to achieve recruitment targets

* Increases in salaries above inflation

* A failure to manage the delivery and funding of capital programmes.