Scottish universities face enduring deficits – funding council

Nearly half of Scottish universities are forecasting deficits in the coming years, according to a report by the Scottish Funding Council, despite an uptick in funding.

The SFC said that its universities are facing “significant financial challenges” in a report that examines 17 Scottish institutions’ annual accounts for the academic year 2024-25, and the latest forecasts for the three academic years from 2025-26. 

It comes as staff at the universities of Edinburgh and Dundee undertake strike action that is expected, in both cases, to last for 25 days over planned job cuts and course closures. 

Despite Edinburgh’s claim that it needs to cut £140 million from its annual budget, the report warns that Scotland’s “ancient” universities – the relative financial health of the universities of Aberdeen, Glasgow and St Andrews, as well as Edinburgh – are “skewing” and “masking” the financial challenges faced by some across the sector in aggregated figures.

Ten of Scotland’s 18 higher education institutions reported operating deficits in 2024-25 – an increase from nine in 2023-24. Despite an increase in SFC funding, 10 have forecasted deficits in 2026-27, and eight universities expect to see deficits continue into 2027-28. Just six universities do not anticipate a deficit. The universities are not identified to allow them to talk more freely about the challenges they are facing.

Total sector cash is forecast to fall by 11 per cent in the next three years, from £1.73 billion at the end of 2024-25 to £1.55 billion the end of 2027-28, while average liquidity days (how long universities could operate on their cash reserves) are expected to fall from 134 to 118 days.

Significantly, the report does not include figures for University of Dundee, which has received multiple multimillion-pound bailouts from the Scottish government after a financial meltdown last year, as it had not finalised its annual report and accounts when the report was written.

The sector’s adjusted operating surplus is also expected to fall sharply, from £90.6 million in 2024-25, to £67.9 million in 2025-26 and hitting a low of £36.8 million in 2026-27, despite an uplift in SFC funding.

A bounce back to £73.1 million is forecast in 2027-28, but this is “mainly driven by optimistic forecast [international] tuition fee assumptions by many universities”, the report says. 

“There is a risk that projections provided in the forecasts are optimistic given UKVI’s [UK Visas and Immigration’s] implementation of Home Office immigration policy including the stricter BCA [basic compliance assessment] metrics, intense competition in international recruitment markets and wider geopolitical developments,” it says.

International fee income “continues to be an area of significant fluctuation and risk, and projections may need to be further adjusted following the autumn 2026 student recruitment cycle”, the paper warns. 

Tiffany Ritchie, director of finance at the SFC, said that Scottish universities are “always going to be attractive to students across the world and researchers across the world”, but added that the “volatility in that income stream is unprecedented”.

Scottish universities have undergone significant controversial restructures, including at Dundee and Edinburgh, as they look to address costs. The report outlines that staff restructuring costs, which include redundancy payouts, are expected to be “broadly stable” in 2025-26 at £22 million, before peaking at £74 million in 2026-27.

Paul Devoy, interim chief executive of the Scottish Funding Council, said: “Scotland’s colleges and universities are operating in one of the most challenging financial environments the sector has faced for many years. [The] SFC is working closely and actively with colleges and universities across Scotland to understand the pressures they face, strengthen financial resilience and support their short-term viability and long-term sustainability. 

“The challenges are significant, but so is the opportunity. By working together with colleges, universities, the Scottish government and partners, we can help build a stronger, more sustainable tertiary education system for the people, places and economy of Scotland.” 

juliette.rowsell@timeshighereducation.com