Thirteen universities face bankruptcy without Government bailout, IFS analysis finds

Camilla Turner
·3-min read
Graduate college students photographed from above wearing traditional mortar board hats and robes at their degree ceremony - oversnap
Graduate college students photographed from above wearing traditional mortar board hats and robes at their degree ceremony - oversnap

Thirteen British universities face bankruptcy without a Government bailout, an analysis by the Institute of Fiscal Studies has found.

Institutions at the greatest risk of financial collapse would need with a £140 million cash injection or debt restructuring to keep them "afloat" in the future.

A new report by the IFS estimates that 13 universities across the UK - which educate approximately 130,000 students - could end up with negative reserves by 2024 as a result of the pandemic.

These institutions, which the report does not name, "may not be viable in the long run" if they are left without financial support, it says.

Universities that were already in a weak financial position before the coronavirus crisis hit, which tend to be less prestigious institutions, are more likely to face insolvency.

A fall in international students combined with increases in the deficits of university-sponsored pension schemes will blow the biggest hole in institutions’ budgets, as well as loss of income from student accommodation, conference and catering operations.

"For around a dozen universities, insolvency is likely to become a very real prospect without a Government bailout,” the IFS report said.

It adds that the Government response "will be critical in determining the future of these institutions."

"Insolvency of a university could cause significant disruption to students' education, potentially leaving them unable to complete their degrees," researchers say.

The IFS analyses the options available to the Government if a university becomes close to bankruptcy.

Ministers could simply do nothing and allow institutions become insolvent to "set a precedent" and show that it will not reward universities with the least resilient finances

It adds that a "very tightly targeted bailout" of around £140 million would help to avoid insolvencies at the worst-affected universities.

The researchers also warn that a more widespread bailout package could cost billions of pounds without providing much support to the struggling institutions most at risk of going under.

In 2018, the higher education regulator warned that failing universities will not be bailed out by the taxpayer and must reform if they are to survive.

Sir Michael Barber, the chairman of the Office for Students, told vice-Chancellors that the watchdog will not come to the rescue of institutions facing bankruptcy, as he hit out at those who think they are “too big to fail”.

At the time, Sir Michael said that some university leaders wrongly believe that their institutions would be bailed out if they fail, but that doing so would just “delay the inevitable”.

Watch video below

Alistair Jarvis, chief executive of Universities UK (UUK), said that the failure of a university is “rare” but added: “Course closures and occasionally campus closures are something many universities will have experience in managing and all registered universities have student protection plans in place for this scenario."

A Department for Education spokesman said: "We understand this is a very challenging time for universities and higher education staff, which is why we have introduced a package of measures to stabilise the sector, help universities manage their finances to avoid cash flow problems and safeguard students.

"We will continue to work closely with the sector to understand the financial difficulties they are experiencing at this time."