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IFS Suggests Coronavirus Could Lead to Insolvent Universities

Posted by Richard Ward in

Image courtesy of Flickr, Creative Commons

A new study from the Institute of Fiscal Studies (IFS) suggests thirteen universities face insolvency unless they receive a government bailout.

Whilst high-ranking universities face the largest drop in international students, due to coronavirus, the least prestigious universities are at the greatest risk.

According to the IFS, the fallout from Covid-19 "poses a significant financial threat" across UK higher education, with most institutions left with reduced net assets.

The IFS say the sector's expected losses are highly uncertain and could be reported anywhere between £3bn and £19bn, equivalent to 7.5% and almost half the sector's annual income.

In addition to a loss of income related to fewer international students, universities will also lose out due to less income from student accommodation, conferences and catering, and on long-term investments.

Meanwhile, those which are running pension scheme deficits will see them widen during the pandemic as investments stagnate.

There is a concern for 2020-21 that those higher-ranked institutions that may see a reduction in international students, will simply recruit more UK-based students, placing further pressure on less prestigious universities.

Whilst the IFS does not name names, it suggests 13 universities, out of the UK's 165 higher education institutions would end up with negative reserves "and thus may not be viable in the long run without a government bailout or debt restructuring."