This article was previously published on the Leadership Foundation website.
New financial forecasts for 2017-2018 for the higher education (HE) sector have been published by the Higher Education Council of England (HEFCE). The forecasts are based on information submitted by institutions at the end of the academic year 2014/15.
The forecasts are highly dependent on the underlying assumptions made by institutions when compiling the data they submit. HEFCE notes that relatively small changes in key assumptions can result significant changes to an institution’s financial position.
HEFCE’s overall assessment is that while the sector’s financial stability remains good, with a low risk of institutions becoming insolvent, there is a general weakening in sector’s financial performance and number of areas of concern, namely:
- the need for the sector to increase surpluses to remove a ‘sustainability gap’
- an increasing variability in the financial strength of institutions
- significant risk areas, including:
- possible future changes (reductions?) in public funding
- the increasing reliance on income from overseas students, with a particular risk being the high level of dependency on Chinese students
- the need for further investment in the sector’s physical infrastructure, to ensure it is in a sound and operationally safe condition, and to improve facilities in order for the sector to remain globally competitive
- increasing levels of borrowing, and falling liquidity that are unsustainable in the long-run
HEFCE’s has also conducted sensitivity to analysis to illustrate the impact on the sector if the key assumptions change, or risks are realised. Unsurprisingly, the analysis shows if multiple events occur, the impact on the sector is more pronounced.
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