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Cassandra calling out higher education

After a week of largely disappointing news for UK higher education, Nicola Owen, Deputy Chief Executive (Operations) at Lancaster University, fears that gloomy forecasts for the future of the sector may prove to be uncomfortably accurate.

Whatuni award winners announced

Loughborough University has been named University of the Year for the second time in three years in the latest Whatuni Student Choice Awards .

Welcome to the higher education rollercoaster

UK higher education had more than its fair share of ups and downs over the past week. Charlie Ball, Head of Higher Education Intelligence at Prospects, charts the highs and lows.

Rising staff costs putting universities under greater pressure, warns Moody's

UK universities will face greater financial pressure over the next three years due to rising staff costs as they accommodate more students, retain talent and negotiate pay rises,  Moody's has warned.

A report from the ratings agency's Public Sector Europe arm, says the current freeze on the cap for undergraduate tuition fees limits universities' ability to offset rising costs with revenue increases. In addition, industrial action over pensions and increased scrutiny on senior staff remuneration pose reputational risks.

"UK universities' staff costs will continue to grow as they hire additional staff to accommodate student growth and award inflationary pay increases to retain talent," said Jeanne Harrison, a Moody's Vice President - Senior Analyst and the report's co-author. "The lack of index-linked tuition fees for home undergraduates will continue to restrict universities' ability to mitigate these rising costs."

In the 2018 fiscal year, staff costs accounted for the largest share (54 per cent) of the sector's total spending and represented a median of 52 per cent of turnover for rated universities. Moody's expects the median to increase to 55 per cent by the 2021 fiscal year.

The universities that Moody's rates expect the number of full-time equivalent staff to continue to increase by around 1 per cent each year between 2019 and 2023 as they increase student intakes.

Although pension liabilities remain manageable given universities' generally strong balance sheets, pensions costs are set to increase over the next two years as contribution rates rise.

Despite ongoing uncertainty around post-Brexit immigration policy, international (non-EU) student applications increased 9 per cent year-on-year for the 2019-20 academic year. Rated universities will continue to rely on strong demand from uncapped international students in order to boost income in the face of rising staff costs, the report says.

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