Deloitte: Universities shrug off uncertainties and invest to compete
13 March 2017
- Two-thirds of university FDs are less optimistic about their finances
- Spending plans remain unchanged despite uncertainties, including Brexit
- Improving student experience and attracting international students remain top priorities
Despite the continued uncertain external environment, UK universities are planning to increase investment in estates and technology, according to the latest Higher Education Finance Directors Survey by Deloitte, the business advisory firm.
Deloitte’s survey gauged the views of 39 higher education finance directors, representing around one quarter of all UK higher education institutions. This year’s survey was produced in partnership with Universities UK.
Optimism and risk appetite muted
62% of finance directors say they are less optimistic about their financial position than they were 12 months ago, this is up from 28% in last year’s survey. Only 5% are more optimistic, down from 22%.
62% say that now is not a good time to take risk onto their balance sheets, broadly unchanged from 61% in 2015. Research intensive universities are more risk averse, with 65% unwilling to take on risk, compared to 56% at teaching-focused universities.*
Pensions appear to be a particular concern, with 95% expecting their liabilities to increase in the coming year, including 44% who foresee a significant increase.
Mixed access to finance
54% expect their demand for credit to increase in the coming year but face differing access to credit. 57% of research-focused institutions say they can access low cost credit, with 52% saying credit is easily available. However, just 25% of teaching focused institutions say they can access low credit and 13% say it is easily available.
Uncertainties yet to affect investment plans
Despite rising uncertainty and lower risk appetite, universities show little sign of reining in investment. 62% say they still plan to increase capital expenditure in the coming year, including 23% who plan significant increases. Just 8% say they plan to cut capital spending.
69% say the outcome of the EU referendum has not altered their current plans, 23% say there has been some change and 5% say there has been significant change. Teaching-led universities are more likely to have altered their priorities because of Brexit, with 38% saying their plans have changed somewhat or significantly, compared to 22% for research-led institutions.
Student experience and international students are top priorities
Estates and assets are the main focus for investment in the coming year, with 82% identifying this as a strong priority, followed by technology and systems at 51%. Expanding international activity is a strong priority for just 23% of universities, with 51% saying it is not a priority.
Asked what they hope these investments will achieve, improving student experience for learning and teaching ranked highest (cited as a strong priority by 67%), followed by increasing postgraduate student numbers (51%) and increasing international student numbers (49%).
International postgraduate students are the main target for universities seeking to boost their student numbers, 86% would like to increase this intake, followed by UK postgraduates (81%), international undergraduates (78%). UK undergraduates are a priority for 47% of institutions.
Julie Mercer, global head of education at Deloitte, said:
“Despite rising uncertainty and lower optimism about their financial position, universities plan to carry on investing.
“Universities are grappling with a shifting regulatory and political environment, rising costs, new technology and increased competition. This is driving them to invest in their offering to students and academics as a route to succeeding in a lively global and domestic market. Those with the best access to credit will be more able to do this and secure a competitive advantage.
“Universities are particularly keen to grow student numbers, particularly postgraduates and international students. However, this may prove problematic with early warning signs, such as a 5% fall in applications, already being seen.
“We are confident that with continued focus, the UK higher education sector can meet these challenges and remain a world-leading centre for research, enterprise and learning.”
Nicola Dandridge, Chief Executive, Universities UK:
“As this survey reveals, universities face a number of challenges. The possible implications of Brexit on our internationally-linked universities are clear and well-documented. Proposed regulatory reforms to the university system, as well as continued debates around the UK's immigration system, will also have an impact on the sector.
“To meet these head on, and maintain the excellence and global reputation of our universities, it is important that we continue to invest in higher education.
“Despite these challenges, the survey is clear that institutions are prepared and will develop their strategies accordingly. Universities are used to managing change and periods of uncertainty and will meet these from a position of strength and resilience.”
Notes to editors
This is the fourth annual Higher Education Finance Directors Survey conducted by Deloitte. The last Survey is available online here.
*Research focused institutions are classified as those where 15% or more of total income comes from research activities. Teaching focused institutions are those where research accounts for under 15% of income.
39 finance directors participated in this year’s survey, representing approximately one quarter of all UK higher education institutions.
About Universities UK
Universities UK is the representative organisation for the UK’s universities. Founded in 1918, its mission is to be the definitive voice for all universities in the UK, providing high quality leadership and support to its members to promote a successful and diverse higher education sector. With 135 members and offices in London, Cardiff (Universities Wales) and Edinburgh (Universities Scotland), it promotes the strength and success of UK universities nationally and internationally.
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.
Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.
The information contained in this press release is correct at the time of going to press.
Member of Deloitte Touche Tohmatsu Limited.