Financial uncertainty pervades university FDs

HIGHER EDUCATION FDs are concerned about the level of financial uncertainty impacting their universities.

Deloitte’s survey of 48 UK university finance directors found 89% with an above normal, high or very high level of financial uncertainty facing their university. More than half (57%) said it was a bad time to be taking risks onto their balance sheet. More than a third (36%) are less optimistic about their financial prospects than 12 months ago.

Operating costs are also expected to increase in the coming 12 months (74%), with more spent on staff, pensions student support services and maintenance.

“The results of our latest survey suggest there is a ‘prudence paradox’ affecting the higher education sector,” said Julie Mercer, head of education consulting at Deloitte.

“Finance directors are wary of the financial environment and favour strong financial management over risk-taking. But, at the same time, ambition and investing for growth are both needed. As such, risk taking is a necessary strategy for universities.

“We see in our own discussions with universities that investment in teaching and research are at the forefront of their strategies. With record numbers of students heading to university following the recent A-Level results and the relaxation of controls on student numbers, there is increased competition to attract students. Meanwhile, students themselves see the quality of teaching as a key factor in choosing where they study.”

Nearly half (45%) of FDs expect a moderate increase in their need for credit in the next 12 months, while 13% say there will be a significant increase in credit. Credit was both easily available and at a lower cost, the survey found.

Bank borrowing will increase, according to 57 of respondents, while 51% plan to increase bond issuance and 63% see increases in financial leverage.