www.le.ac.uk

Higher Education FinanceLiving with uncertainty

Carol ProkopyszynAssistant Director of Finance

Former United States Secretary of Defence Donald Rumsfeld

“There are known knowns; there are things we know we know.We also know there are known unknowns; that is to say we know there are some things we do not know.But there are also unknown unknowns – the ones we don't know we don't know.”

Known Knowns

• Major shift in government policy towards HE

• Not just motivated by the need for cuts, but shift towards more market based sector

• Students = market power (perhaps)

Known numbers

• Oct 2010- Department for Business, Innovation & Skills announced 25% revenue budget cut and 44% capital cut in 2014/15.

• Higher Education funding will reduce by 40% from £7.1 bn to £4.2 bn.

• Lord Browne recommended higher fees- government announced £9,000 UG cap.

Where have we been….2005 2010

Student numbers 2,287,595 2,493,460

Total income £17.993 bn £26.679 bn

Operating surplus 1.19% 3.09%

International students 7.10% 9.05%

Operating surplus

2001

/02

2002

/03

2003

/04

2004

/05

2005

/06

2006

/07

2007

/08

2008

/09

2009

/10

0.00%0.50%1.00%1.50%2.00%2.50%3.00%3.50%

Operating Surplus as % of Income

The new H/EU landscape

• Core and margin approach – 20,000 students moved around sector each year – an opportunity for some and a threat for others

• No limits on recruitment of AAB+ students – an opportunity for growth (for some!)

• Active encouragement for private providers to enter the sector

• Funding follows the student

Known unknowns

• What will students do?

• Will they still want to come to University?

• Will they want to come to the same institutions and the same courses?

• What will their expectations be?

• What about PG funding?

• What research funding will be available?

Revolution or evolution?

• Will we have the same number of institutions?

• Will we see mergers?

• Will some become ‘for profit’?

• More concentration – restructuring?

• Can research be sustained in so many institutions?

• Or will it all look quite similar in ten years?

Unknown unknowns

• Would you have predicted this?

• Still changing very fast

• Other risks remain – international students / the Euro / ???

Implications

Institutional strategy

•Deciding where the institution fits in the new environment•Maintaining student experience and research excellence•Review of existing activities•Pace of change / management decisions•Opportunities for strategic partnerships and relationships

Financial strategy

•Focus on surplus and cash generation remains vital•Reduction in HEFCE capital funding requires further consideration of borrowing and partnerships•Continued focus on pricing and strong cost control•Management of risks and diversification of income streams

Financing changing expectations....

Generating funds

• Opportunities for pricing– Premium products / margins– Matching the ‘high – street’

• Cost control

• Working with others? Partnerships with other HEIs and the private sector

• Replacing capital funding?

The University of Leicester- 2010/11- Known numbers!

• Income over £260m

• Expenditure over £250m

• Surplus over £9m, a good result

• Capital expenditure almost £40m

• Good financial position to face funding challenges

Income 2010/11- Leicester knowns

Fees; 89.4

Grants; 74.9

Research; 48.7

Other; 47.7

HE Finance – unknown future?

What will HE Finance look like?