Three Scottish colleges in 'financial distress' handed more than £8.3m in lifeline funding
A Scottish Government body has agreed more than £8.3 million in loans and cash advances to ensure the ongoing “sustainability” of three colleges, it can be revealed.
Documents show that UHI Moray “in particular required additional support” in 2023/24 from the Scottish Funding Council (SFC), which oversees public investment in colleges and universities.
Advertisement
Hide AdAdvertisement
Hide AdThis included “liquidity support” in the form of a £2m advance on its grant, as well as £990,000 to support a voluntary severance scheme at the Elgin-based college.
It has also emerged that a loan of £1.3m has been provided by the SFC to UHI Shetland.
Buy our new annual subscription package & enjoy our award-winning journalism plus everything The New York Times has to offer, including The Athletic, Games and more. Subscribe here.
And another loan of £4.8m was given to the recently-created UHI North, West and Hebrides, to support both “liquidity cover” and voluntary severance costs. A total of £4.075m was from the SFC, with £725,000 coming from UHI to the partner college.
The university said the loans for UHI North, West and Hebrides were largely used for costs associated with the amalgamation of three previous colleges.
Advertisement
Hide AdAdvertisement
Hide AdUHI Moray, UHI Shetland and UHI North, West and Hebrides are all part of the University of the Highlands and Islands (UHI) network, which was awarded university status 2011, after a long campaign to create an institution that would allow young residents to stay and study degree-level courses in the region, rather than leave their communities.
It now has 36,000 students studying in further and higher education across 70 centres.


In 2023/24, UHI embarked on a restructuring amid a period of change, with Vicki Nairn named as principal and vice chancellor.
The university’s annual accounts highlight how it put a “focus on financial sustainability including a streamlining and reprofile of the workforce during 2023/24 as part of its move to be a fully integrated, financially sustainable and people orientated organisation”.
Advertisement
Hide AdAdvertisement
Hide AdStaff costs decreased by £5.8m to £11.3m compared to the previous year, mainly due to a decrease in pension adjustments, and a reduction in staffing following a compulsory redundancy exercise.
The financial outturn at UHI for 2023/24 was a surplus before other gains and losses of £4.6m, compared to a surplus of £700,000 in 2022/23.
However, the report said: “In 2023/24, most UHI academic partners reported an operating cash deficit and several required additional liquidity support to cover both operating commitments and back-dated pay awards.
“The SFC, in its role as the national strategic funding body, provided additional funds in the form of both loans and advances of grant.”
Advertisement
Hide AdAdvertisement
Hide AdTalks with the SFC about further support continue, with the regulator having been informed that “UHI cannot fund the ongoing financial problems arising in some academic partners”, although they will be strongly supported within funds available.
The annual report added: “UHI has and will continue to represent the interests of academic partners by putting forward cases for funding to the SFC and to Scottish Government in relation to those partners in financial distress as part of recovery plans.”
The Scotsman previously reported how both UHI Inverness and UHI Perth, the two biggest colleges in the university network, had raised concerns behind the scenes about reform plans, which focus on UHI operating more like a “single institution”.
In August 2023, UHI North Highland, UHI Outer Hebrides and UHI West Highland merged into a single college to become UHI North, West and Hebrides.
Advertisement
Hide AdAdvertisement
Hide AdData released to The Scotsman under freedom of information (FOI) laws shows more than £900,000 was spent on voluntary severance packages for 41 staff at the new college in 2023/24. There had been 13 compulsory redundancies in 2022/23.
UHI Shetland spent £270,000 on 13 voluntary severance packages in 2023/24. There were seven compulsory redundancies at UHI Argyll in the last two years.
Meanwhile, it was reported in October that 45 lecturers and support staff – about a quarter of the workforce – were to leave UHI Moray under a voluntary severance scheme.
Across Scotland, more than £37 million has been spent agreeing voluntary exit packages for more than 1,700 college staff in the last five years, amid an ongoing financial squeeze.
Advertisement
Hide AdAdvertisement
Hide AdThe Scotsman asked Graeme Dey, the minister for further and higher education, about the UHI colleges in an exclusive interview in August.
He said he had made it clear to bosses at the institution that local colleges should be taking the lead in the restructuring.
Mr Dey added: “Subsequent to that, they’ve looked to develop those proposals a bit further, the situation at Moray and Shetland has emerged, the scale of the challenges there.
“But at the heart of this is, UHI as a concept is not up for discussion. UHI and what it delivers is hugely important to Scotland.”
Advertisement
Hide AdAdvertisement
Hide AdA spokesperson for UHI said: “The additional Scottish Funding Council funding represents an advance of grant-in-aid intended to address colleges’ liquidity needs and ensure financial sustainability.
“We continue to engage in discussions with the Scottish Funding Council regarding potential strategic investment to support the development and delivery of a new operating model for UHI.”
On UHI North, West and Hebrides, the spokesperson said: “These loans were largely used to support merger implementation costs, including significant costs relating to organisational restructuring as well as deficit issues from the three legacy colleges.
“This funding has enabled significant progress to be made including the generation of £3.3m of savings to date.”
Advertisement
Hide AdAdvertisement
Hide AdA spokesperson for the Scottish Funding Council said: “In an extremely tight fiscal environment, colleges face many challenges including increasing staff costs, high energy costs and other general cost pressures.
“As Scotland’s tertiary education and research authority, we have a key role in helping to ensure the sustainability and financial viability of the colleges and universities we fund. In the current climate, this means we have to be flexible, innovative and supportive where issues are identified.
“Our work with UHI colleges is ongoing and focussed on maintaining the quality of the learning experience across the UHI partnership.”
Comments
Want to join the conversation? Please or to comment on this article.