The debt burden of the UK’s 20 largest universities has increased 50% over the past five years, new analysis shows.
A report by New Street Consulting Group has found that the debt of the institutions, ranked by student population, has jumped to £9.5 billion from £6.3 billion in 2016.
The increase, according to the executive recruitment consultancy, is due predominantly to major infrastructure projects undertaken by the UK’s biggest universities, including the buying and building of student accommodation properties.
The firm says that universities are also under pressure from expanding student populations to develop more on-campus retail and leisure spaces to enhance the overall university experience.
However, at the same time, the Covid-19 pandemic has “sharply impacted” the revenues universities are able to generate from these amenities – placing mounting pressure on debt repayments.
Despite a 3.2% rise in student numbers in 2019/20, many UK universities have embarked on cost-cutting projects to offset losses stemming from an anticipated decline in overseas students, who pay higher fees than their domestic counterparts.
New Street Consulting Group, which describes itself as a ‘leadership consultancy’, suggests hiring talent from outside the higher education sector to manage the finances of increasingly complex university ecosystems.
Scott Hutchinson, principal consultant of education at New Street Consulting Group, said: “This has been a particularly difficult year for universities – the coronavirus pandemic could not have come at a worse time as their debt burdens grow.
“Major universities have become very large, complex and leveraged organisations over the last 20 years. They now need to ensure that their senior leaders have the right mix of skills and experience to run a business of that kind effectively. Looking outside the higher education sector for talent is now a step all universities should be taking.
“Expanding their social and retail offerings mean that universities are competing with other social and retail destinations. That requires a very different skillset than most university management teams will have. Bringing in senior talent from the retail, leisure and real estate sectors should be part of the plan for more universities.”
Date published: 18 June 2021