Financial sustainability in Welsh HE

For Wales, see England.

That, at least, is the public policy cliche that Senedd and the Welsh government work to dispel, but – as the publication of Medr’s financial sustainability report reveals -in the case of higher education finance the weather is the same on both sides of the Severn Bridge.

International recruitment is down, inflation makes operating costs more expensive – compounded by rises in National Insurance and pension contributions. Research and home teaching continue to run at a loss, and there is not really any untapped potential for additional income (in particular not from the public purse) in the grab-bag of other activities that happen in Welsh HE.

And if that is the weather, the outlook doesn’t offer much hope either. The demographic decline in UK 18 year olds hits harder in Wales, the Home Office looks increasingly fighty on international recruitment, and various geopolitical pressures nail on a likely rise in inflation.

The overall operating deficit for the Welsh HE sector is £79.3 million, based on underlying deficits at six of Wales’ eight providers (hats off to Wrexham and South Wales for bucking the trend). You don’t need to spend much time looking at figure 14 to spot that the travails at Cardiff (impressive leverage there!) and, to a lesser but still notable extent, Swansea, have an outsize impact on the plight of the sector. But we shouldn’t sleep on Bangor’s underlying deficit either.

Estates maintenance is the canary in the coalmine here – there’s a “significant backlog” of maintenance even before we build in the costs of Net Zero plans. And the budgets within universities are so tight that what limited development is underway (sometimes it is cheaper to build a new building than to patch up a 60s RAC and asbestos nightmare) is funded by yet more external finance. Why? – the remaining cash available for work like this (and anything else the sector needs to pay for) is being drawn down at a fair rate: £81m in the last year alone.

The glimmer of good news is the inflationary fee rises – this at least drags fee income up (though not as far as costs will rise) even as student numbers stay broadly similar.

The forecasts – as forecasts tend to – paint a picture of an unexpected recovery in the face of adversity. A gradual increase in home tuition and research income, a slightly more exponential rise in international fees and an inexplicable growth of “other income” – plus an altogether more plausible, sadly, decrease in staff costs – drive the return of the sector to a 0.5 per cent deficit by 2027-28 and a small surplus the following year. A lot of faith is placed in the success of plans for consolidation and cuts already being enacted, but headroom will remain very low.