Edinburgh University in stark warning of pressures 'greater than in any recent times'

Principal of prestigious institution warns of ‘difficult and potentially painful’ changes ahead

One of Scotland’s most prestigious universities has warned it faces a challenge that is “greater than in any recent times” as it revealed a deterioration in its finances.

Edinburgh University principal Sir Peter Mathieson said “difficult and potentially painful” times were ahead as the ancient institution published its annual report for last year.

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Accounts for 2023/24 show the university’s surplus before other gains and losses, and prior to pension-related changes, was £25million, down from £104m in the year before.

Its earnings before interest, taxes, and amortization (EBITA) was £84m, having fallen from £148m. It is now 5.8 per cent of total income, having previously been 10.7 per cent of income.

The view at the Old College at University of EdinburghThe view at the Old College at University of Edinburgh
The view at the Old College at University of Edinburgh | Getty Images

The accounts also confirm Sir Peter’s salary increased from £348,000 to £362,000, with the package including payment in lieu of employer's pension contributions rising from £385,000 to £402,000. His total remuneration is now £422,000.

The principal announced in November that a new voluntary redundancy scheme would open at the university, with compulsory job losses not being ruled out.

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In the newly-published annual report, Sir Peter said: “The university sector is facing severe financial challenges brought about by a series of factors, including international student recruitment within an already competitive international student market, increasing staff costs, utility costs, the impact of inflation and supply chain issues together with the continued inadequate levels of funding for Scottish domiciled and other UK students.

“Our outgoings are consistently growing faster than our income. We are therefore taking a series of steps to change our operating model to ensure that we remain financially sustainable.”

Sir Peter added: “We need to ensure that Edinburgh remains strongly placed to provide leadership in research, teaching and social impact for the immediate and longer-term future and to seize strategic opportunities when they arise. This will require changes that will be difficult and potentially painful.”

Edinburgh University’s total income in 2023/24 was £1.434billion, an increase of 4 per cent from the previous year, driven by higher research income and increased returns on our treasury investments.

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Student headcount fell by 0.5 per cent to 49,485, from 49,740 in the year before.

Total expenditure in 2023/24 was £1.409bn, a 10 per cent increase on the £1.28bn in the year before, with salary costs rising by 12 per cent, and other operating expenses up by 17 per cent.

Meanwhile, the UK government’s decision to raise National Insurance employers contributions is expected to add £12.5m to the university’s staff bill, or 2 per cent.

The Scotsman recently reported how the university had hired an interim finance director who describes himself as a “turnaround specialist”.

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The previous finance director, Lee Hamill, wrote in the annual report: “Growth in tuition fees, our largest income stream, is forecast to continue at levels below recent historic trend.

“Against this, our expenditure is forecast to grow at a level greater than income driven by pressures from inflation, changes to pay scale and the recent increase to employer’s National Insurance contributions.

“The university presently faces a financial challenge greater than in any recent times, but we are well placed to respond to these challenges through the next financial year and beyond.”

Sir Peter recently revealed how the university feared bankruptcy in the early days of the Covid-19 pandemic.

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In recent weeks, The Scotsman has been reporting on the financial position of the nation’s universities.

Earlier this week, Robert Gordon University posted a deficit before other losses of £6.15m, down from an underlying surplus of £2.74m in 2022/23.

Abertay University, meanwhile, reported a deficit before other gains or losses of £578,000 last year, having had a operating surplus of £1.217m in 2022/23.

Heriot-Watt University posted a £10.5m underlying deficit for last year, while there was a loss of £14.4m at the University of the West of Scotland, an underlying deficit of £13m at St Andrews University, and of £8.5m at Aberdeen University.

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Glasgow University’s recorded an operating surplus of £28.7m, Napier University had a surplus before exceptional items of £2m, at Glasgow Caledonian University there was an underlying surplus of £13.5m, and the University of the Highlands and Islands (UHI) recorded a surplus before other gains and losses of £4.6m.

Queen Margaret University posted a £3.125m operating surplus for last year, up from £162,000 in the year before.

In a statement issued by the Edinburgh University, Sir Peter said: “As a major employer with significant and diverse income streams, we take our fiscal responsibilities incredibly seriously.

“Our annual report and accounts, which report on the year from 1 August 2023 to 31 July 2024, show an overall positive set of outcomes despite challenging circumstances. This is testament to the dedication and hard work of colleagues from every corner of our institution.

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“This report is published by the University and made widely available every year. In recognition of the challenges the higher education sector is currently navigating, we have provided colleagues with supplementary information to help answer questions they might have.

“We are not immune to these challenges and as they grow in urgency and severity, it is crucial that we take action to ensure the university’s long-term financial stability.”

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