A combination of rising costs and the cap on tuition fees has burned a hole in the University of Manchester’s finances.
The latest accounts show its operating surplus – the equivalent of a profit, and described by the University as a “key measure of financial performance” – fell by nearly £40m to £25m in the year to July.
This meant it missed a key target – a surplus of 5-7% of total income. Last year the surplus fell from 6.3% of turnover to 2.4%. It still has £315m in cash reserves, although this figure shrank by £70m, mainly due to building projects.
In the report president and vice chancellor Prof Dame Nancy Rothwell said it had been a “challenging year” for all universities and added: “We must address the level of our surplus to ensure the sustainability of our university.”
Edward Astle, chair of the Board of Governors said: “Some actions have already been taken, and others are in hand, to bring our operating surplus back to our target range of 5–7% of income.”
The Mancunion asked the University how it was planning to increase the surplus. In a statement a spokesman said: “With an increasing number of external challenges facing the sector, like many other institutions across the country, Manchester is looking to improve its efficiency and effectiveness.
“Our funding comes from a wide variety of sources, including student fees, research and government grants, and much more modest revenues earned from activities like conferences and catering. This income is then invested in many different ways back into the University.
“However, our financial objective, as ever, remains the same – achieving long-term financial sustainability and maintaining our strategic goals, including year-on-year income growth and delivering an operating surplus to reinvest into our University.”
In the report, the University described the shrinking surplus as, “a product of continuing growth in staff costs whilst the external environment prevents a rise in the Home Undergraduate Tuition fee and many research funders will not pay the full costs incurred by the University.”
It added: “The University has limited influence over the continued growth in wages and salaries, as this is driven by contractual increments and the national pay award. We have also seen a £4.4m increase in voluntary severance costs as a result of our strategic initiatives.”
The accounts show the University’s income rose by 5%, to £1,05bn, in part down to fees from international students. Debt fell slightly to £403m and the pension deficit was down 22% to £221.6m.
Professor Dame Rothwell’s overall pay packet fell by £37,000 to £269,000, due to the fact she took less in pension contributions as cash.
Josie Fowler, second year Politics, Philosophy, and Economics student, commented: “I don’t think it’s well run financially. The amount of money that they clearly have at their disposal and they are not utilising it successfully. Given there is so much disenchantment among students on their fees, staff on their wages, and departments having cuts for funding. It seems ridiculous there is yet another negative piece of news on the University’s finances.”
Hana Jafar also believed the University was being poorly run financially: “Unethical investments, the whole pensions issue, graduate teaching assistants not being paid on time, and [there’s a] general lack of transparency.”
Jacob Thompson, English Literature and American Studies third year added: “Frankly, I’m baffled by these statistics. More transparency is required – at the moment, it’s like looking through a bathroom window. I can see the outline of a person, but don’t know what they’re doing.”