Update on our current position
02 Jul 2020
A message from Professor Nancy Rothwell, President and Vice-Chancellor
In the nearly four months since we entered lockdown we have achieved a great deal through the resourcefulness and hard work of our staff. We have quickly shifted to online teaching and assessment, refocussed much research towards understanding and treating COVID-19, taken part in numerous voluntary activities to help our local communities and many of our staff and students have been working or volunteering in frontline healthcare services. We have much to be proud of.
We are now all hopeful of a gradual and cautious return towards a slightly more ‘normal’ situation.
We live in very uncertain times, so if we are to realise our ambitions our commitment to the University’s purpose, vision and values is ever more important. Because of this continuing uncertainty, my colleagues and I are placing high priority on setting out openly and transparently our position, our assumptions and the actions we have already taken and may have to take to mitigate against the impacts on our University.
Inevitably, not everyone has read these messages or watched the video describing our finances in some detail, and our openness and transparency can be misunderstood. For instance, some people have apparently drawn the conclusion from the wealth of financial information we have provided that we are in a worse position than other comparable universities. This is simply not true.
Key to our future success is a solid financial base. This was recognised long before the current pandemic because research is underfunded (~70% of full economic costs) and is enabled by other income streams including international students. The Government has now announced extensions to UKRI grants and a package to support research in the event that there is significant loss of international students. The more research active universities of course face the greater impact. This Government support is welcome, though the majority (75%) is in the form of loans. The impact of COVID-19 comes on top of a very stretched financial position for all universities as the Government-capped home/EU fees have reduced in real terms over 5 years, while staff costs have risen well above inflation, in part due to escalating pension costs.
Our Strategic Plan (developed after very extensive consultation) recognised that we need to have sufficient financial resources ( an annual surplus of at least 5%) to invest in our core activities in order to further improve our teaching, student experience and research and so deliver our future ambition. To help us achieve this our budget for the next few years had already required us to make significant savings, largely in the Professional Services, to improve our efficiency and effectiveness. That challenge is likely to be stretched much further by the pandemic, which is likely to demand further measures as soon as we know about student recruitment.
We were probably the first University to state our assumptions about the likely loss of international students, ie that 50% will not come to study with us. This assumption could prove to be wrong, but it is similar to or lower than that made by our comparator universities. As a responsible employer we have to plan now for the worst, but we are working as hard as we can to deliver the best outcome.
Our acceptances from international students are currently above last year (like the whole sector) but bookings for residences, which may be a more accurate indicator, are well below expectations, and much can change for the better or worse over coming months. All Russell Group Vice-Chancellors are expecting a major loss of income.
As the pandemic was recognised, we quickly put in place many measures to mitigate against these threats, including halting all capital spending that is not in contract or externally funded, delaying long term maintenance and non-essential staff recruitment, reducing non-staff costs, the Senior Leadership Team (SLT) took a voluntary 20% pay cut and we launched a series of voluntary measures.
If the loss of income is as we predict these measures will all help, but could still leave us with a large gap that we must consider in the medium to long term as well as over a short period of immediate crisis. We do not have excess reserves or other liquid assets that can be readily drawn upon without seriously putting at risk our future commitments. We are looking at possible assets that could be sold, but many are restricted by legal covenants or have greatly reduced value in the current climate. We are also in discussion about short and longer term loans.
We are in discussion with the campus trade unions about how we close that gap, which will have to involve some savings in staff costs as these represent a majority of our expenditure, and we will have exhausted other possibilities. We are discussing pausing increments, a defined period of overall pay cuts and changes to the redeployment policy. Without these changes we are likely to face a greater need to reduce staff numbers. To add to this we will likely soon face a major, further challenge on the USS pension.
While we are working now on those areas of change that were identified as part of our strategic plan well before COVID-19, decisions on more major changes as a result of potential loss of international students will not be taken until the autumn when recruitment is known.
We have put in place a number of measures to help and support staff who may be struggling to manage their work-life balance due to personal circumstances.
As we move into the summer months, we should all take some time to relax and where possible enjoy a proper holiday.
Throughout this pandemic and its many consequences, it is important that we remember our values, our core goals and our future ambitions and that at the heart of these are our staff and students. It may now feel like a distant memory, that just over a year ago 91% of our staff felt that the University is a good place to work and 89% felt proud to work here. We must ensure that it continues to be so in spite of the many challenges we face.
Professor Nancy Rothwell
President and Vice-Chancellor