The state of sector finances, 2024–25

It is difficult to think of a UK higher education provider that is not showing some signs of financial stress.

The choice (in England, Scotland and Northern Ireland at least – Welsh provider financial accounts will turn up in the next few weeks) appears to be running a much smaller surplus (or, increasingly – in 44 cases we have seen so far – a deficit), or making the kind of savings that require radical changes to the size and shape of the provider: losing courses, departments, and staff – or storing up maintenance and compliance costs to cause problems in future years.

It’s a perilous moment: even though there is evidence that providers are driving up revenue and cutting non-staff costs, we’re clearly cutting into bone at this point. And this is (unless managed very carefully) to the likely detriment of applicant choice and the student experience.

Key financial trends

On the face of it, it is the rising cost of employing staff that is doing the damage. Just about every provider has seen these costs rise, with larger post-92s hit particularly hard. The reasons are well known – an increase to employer National Insurance Contributions (NICs) from the spring of last year, and the impact of the (uncompensated) increase to employer contributions to the Teachers’ Pension Scheme (TPS). Staff cost rises also correlate with the likelihood that a provider is running a deficit – places in that situation are also likely to have seen a substantial rise in cost per FTE.

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Note: for both the staff costs related calculations on this chart I have removed the impact of pension provisions movements, as is usually the practice.

Several providers have seen decreases in international fee income, linked to declining recruitment and the need to freeze or drop fees to remain competitive. There are also visible issues with home fees among less selective providers. Overall, it appears that larger mid-tariff providers are seeing the worst of both worlds.

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There is no type of provider that appears to be safe from declines in income, increases in expenditure, or any other indicator of a worsening position – the current financial squeeze is no respecter of status or prestige.

There has been some concern among commentators and consultants about the availability of finance across the sector – the boom years that followed deregulation of provider borrowing in 2017 have long since passed, and there has been suggestions that borrowing has become more expensive and harder to come by (with tighter covenants) in recent years.

From what we see in this data this analysis doesn’t hold up in all cases. The sector is paying less, in the main, in interest payments over last year. We see a small number of providers with increased long term borrowing, and a few more that have seemingly been drawing down on revolving credit facilities to meet short term financing needs. But that said, the overall value of finance within the sector has stayed broadly stable even if the cost of finance has grown – with longer term loans slowly turning into medium term as time passes.

Somewhat counterintuitively, many providers have recorded increases both in cash realised from operating activities and overall income. This is growth rather than savings, and suggests an increasingly commercially focused mindset in realising income from every available source. Of course, overall growth for the sector is a thing of the past – these growths (certainly in terms of fee income and research income) reflect that competitive pressures inevitably lead to winners and losers. The winners are the ones improving their income.

However, the majority of providers are looking at – at best – a heavily reduced annual surplus over 2023-24. As we’ve noted, some 44 providers where data is available are reporting a deficit for 2024-25, and the majority of these – including three from the Russell Group – were in surplus the previous year.

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So where does this leave us? England’s new fee cap escalator is designed to cut the graduate decline in the value of home fees. But the kinds of providers that get a large proportion of their income from home undergraduate fees are also those that are struggling to recruit in an increasingly competitive environment, so we can by no means see the increase as something that will make positions less perilous in most cases. Don’t get me wrong – it is a welcome change in fortune for universities after years of fee freezes.

The issue as I see it is one of rising costs. The marquee example is the increase in NIC contributions and pension contributions that has added such a lot to staff costs, but geopolitical instability adds a lot to the cost of pretty much everything. Non-staff costs are less painful for universities to manage, but these are the kinds of things that make the experience of being on campus less pleasant and work harder to do. We know that universities are postponing or critically examining spending on everything from maintenance, to consumables, to subscriptions: a trend that means that non-staff costs are staying stable, but that trouble is being stored up for later.

It almost goes without saying that individual providers are experiencing these, and other, pressures in their own way. This last dashboard is a quick way of looking at all the available data for a single provider (note that I’ve removed Staff FTE from this view in order to make things easier to read).

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These are all as published in provider financial statements (so will include the impact of pensions position movement within fields related to staff expenditure and thus expenditure more generally. If your provider is not featured it is because the statement was not available at the time of publication.

Where the data comes from

Ordinarily, we’d have to wait for the release of HESA Finance data – which usually appears in the late spring for the majority of providers with financial years ending in July – to get a sense of the way the sector is facing increasingly challenging headwinds.

When the HESA data does finally appear, it refers to the previous (2024-25) financial year: which, given that it arrives a few months before the end of 2025-26’s cycle, is not all that helpful in understanding the current state of the sector.

Why the delay? It’s a fair question, given that providers are required to publish detailed financial statements just five months or so after the end of the year in question and submit data to the regulator at the same time. The secret ingredient is validation. This bit of the process offers providers the chance to check (and if needed, update) data before it is published, which would include derived fields (calculations carried out by the data collector, for instance the Key Financial Indicators stuff).

Last year, Wonkhe transcribed key data from a bunch of published statements to develop a sector-level financial dashboard as early as January. This year we have rather more fields, allowing us to draw on 132 published financial statements from large-to-medium sized providers in England, Scotland, and Northern Ireland.

This is what was available to us at the time of publication – all we can say for certain about missing providers is that there has been a delay in publishing their financial statements, which could be down to the capacity of external auditors or a rethinking of future plans.

I’ve also done a small amount of analysis myself – both in terms of comparison with the previous year (2023-24) of data, and expressing items as proportions of total income or total expenditure. If those are incorrect, it is entirely my fault.

Those keen to analyse further should take a look at the fabulous BUFDG Guide to Understanding University Finance – which includes definitions of key terms and derivations of common calculations. The danger of choosing one figure to explain an institution’s, or the sector’s, financial position is reduced but the danger of misinterpreting financial information remains unless readers take some time to understand how the figures fit together. Readers will also benefit from returning to the source of the data – the published financial statements – for the full context.

Transparency helps

At this stage, early data on the financial travails of UK higher education is essential for anyone in policy circles looking to address problems with limited public funds. It is good to see regulators (including OfS in England) gathering and presenting – in aggregate – in year data to inform these efforts.

Data from annual financial statements is often the most up-to-date financial information available to staff who work in the institution in question. It is nearly a year old by the time it arrives in validated form via HESA, and of course refers to the previous year of activity. The alternative is an exercise like this – giving us a necessarily incomplete and caveated picture (though the addition of further data points as they become available will improve things).

What’s indisputable is that all kinds of people are concerned about the financial health of higher education providers – and there’s not really any way that suspicions and uncharitable interpretations can get addressed other than by honesty, transparency, and prompt disclosure. Fundamentally, people are going to plough through accounts and pick out interesting numbers anyway: the best defence against this is to provide an easy-to-use and reliable resource and support that with information to aid interpretation.

For the benefit of the sector, it feels to me as if we need to get better at getting usable and comparable summaries of published data out as quickly as we can.