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Significant financial challenges ahead for English HE, report warns

The higher education sector in England was in sound financial health overall last year, but funding cuts and student recruitment will present significant challenges and risks for many institutions, a new report warns.

A review of university finances by the Higher Education Funding Council for England shows that the sector reported strong cash balances and operating surpluses of £956 million in 2012-13. However, this was £17 million less than the previous year, and future reserve levels and pension deficits are likely to be significantly affected by a new requirement on institutions to include pension scheme liabilities on their balance sheets, says a report on the review.

Financial forecasts for 2013-14, while also showing an apparently healthy state, do not reflect cuts of £125 million announced in the Government's grant letter to Hefce last month.

The report also warns that there continues to be wide variation in the financial performance of individual institutions across the sector, and some will face challenges if they experience repeated falls in students recruitment. The recent slowdown in demand from international students and for part-time courses will add to difficulties.

Removing the student numbers cap from next year will create both opportunities and risks, and increasing levels of uncertainty over student recruitment.

While the sector is planning a 46 per cent increase in spending on new buildings and facilities in 2013-14, this "may not be sustainable without continued government support and market confidence", Hefce said.

Professor Madelaine Atkins, HEFCE's Chief Executive, commented: "While short term health is not an immediate concern, future uncertainties and developments present key challenges for individual institutions and for the sector as a whole. Significant reductions in HEFCE funding and pressures on students recruitment will lead to greater volatility, and growth in capital investment, essential to the continuing success of the sector, will require government support."

Get the full picture from HEi-know: Briefing Report 132