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Universities Face Funding Shortfalls

Posted by Richard Ward in

Image courtesy of Flickr, Creative Commons

According to the latest research by the Institute for Fiscal Students (IFS), universities and colleges in England face "significant funding shortfalls and heightened uncertainty" due to the impact of Covid-19.

The IFS highlighted the impact of fewer international students, potentially higher dropouts and high pension costs as all impacting university's financials.

The report said the largest financial risk for universities is pension costs, adding: "New figures suggest the additional cost to universities of meeting existing pension promises may well be as high as £8bn, or double our previous estimate of around £4bn."

Universities could reduce this by taking on more risk, through further reductions in the pensions provided by the scheme or by rises in employees' contributions.

However, measures such as these are likely to be controversial with lecturers.

Commenting on the report, co-author Ben Waltmann said: "In the end, student numbers have held up better than expected, but universities still face financial risks from no-shows or higher-than-usual dropout, as well as reductions in other income streams."

"By far the biggest source of risk now appears to be the large deficit on the main university pension scheme, which has increased from £3.6bn in March 2018 to a monumental £21.5bn in August 2020, according to the latest preliminary estimate."

"With contributions already at more than 30% of earnings, it is hard to see how a deficit on this scale, if confirmed, could be evened out without further cuts in the generosity of the scheme."