Financial sustainability of higher education providers in England

Key points

• The Office for Students (OfS) regulates higher education providers in England. As part of the registration and ongoing monitoring process, all higher education providers are required to demonstrate that they are financially viable and sustainable.
• Our analysis suggests that the sector overall is currently in reasonable financial health. However, this general picture masks considerable variations in financial performance between individual providers.
• Providers’ forecasts indicate a general weakening of financial performance over the next year, with improvements thereafter. Some of this forecast improvement is due to ambitious assumptions about growth in student numbers. Most providers are assuming growth in the total numbers of UK, EU and overseas students, with 122 (out of 183) projecting increases in total student numbers of more than five per cent over the next three years. The majority of these providers are not reliant on such projected growth to ensure their financial viability and sustainability, but they may need to reduce their projected costs if their student recruitment ambitions are not met. We are closely monitoring those providers that are reliant on growth in student numbers to continue to meet our requirements for financial viability and sustainability.
• The higher education sector continues to face uncertainties, including the UK’s future relationship with the EU; potential changes in government policy following the review of post-18 education funding; and as a consequence of student choice following a continuing decline in the 18-year-old UK population to 2020. The consequences of these uncertainties will require individual providers to adapt to different degrees.
• Providers also face increased cost pressures, not least following recent valuations of large multi-employer pension schemes and more general inflationary pressure on costs.
• In light of the uncertainties and challenges they face in the foreseeable future, providers will need to re-assess their financial assumptions and forecasts and ensure that adequate contingency measures are in place to navigate an uncertain environment and ensure financial viability and sustainability.
• The OfS will continue to monitor individual providers for early signs of financial difficulties and will intervene where we consider there to be increased risk that a provider may not be viable or sustainable in the future.

Notes

1. There were 183 providers on the OfS register as at 7 March 2019. Further education colleges are excluded from this analysis.
2. ‘Financially viable and sustainable’ means that the OfS judges that there is no reason to suppose a provider is at material risk of insolvency within a period of three years and that a provider’s plans and projections show that it has sufficient financial resources to fulfil conditions D(iii) and D(iv) of the OfS regulatory framework for a period of five years from the date on which the judgement is made.