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University cuts pay and cancels construction due to financial strain

Like many institutions across the world, the University of Edinburgh is having to make difficult financial decisions owing to pressures caused by the ongoing impact of the coronavirus pandemic.

Last May, Principal Peter Mathieson revealed in a letter to all staff that the University is expected to face a “significant financial challenge” in the 2020/21 academic year, which is expected to “remain very real for at least the next four to five years.”

The impact of the pandemic on the University’s finances has been varied – there are costs associated with moving learning online, for example – but the main losses have come from University-managed accommodation and hospitality services, and a reduction in the numbers of international students, who in 2019/20 made up 49% of Edinburgh’s student population.

A spokesperson for the University told The Student that income from residences and catering fell by £11 m last year compared to previous years, and that the University also lost income from other streams such as consultancy and veterinary services.

Brexit is also set to have an impact on the number of international students choosing Edinburgh to study, with fees for EU students set to increase sharply for those starting their studies from September this year.

Despite these pressures, the University still managed to make a surplus of £48 m last year, down from £61 m in 2018/19. Additionally, the University’s endowment at the end of last year stood at £489 m, and made an annual return of 5.6% in the same year.

These figures seem encouraging, however, they must be balanced with another figure which Mathieson revealed in his May email; that the University’s operating costs run to £90 m per month. As such, the operating surplus for last year is enough to run the University for just over two weeks.

With these pressures in mind, the University is currently engaging in various cost-cutting measures, including putting on hold any non-essential construction projects which have not yet been started (set to save £92m), and introducing pay-cuts for the senior team.

The University also told The Student that recruitment has been paused for at least six months unless in exceptional circumstances, and that there is also a renewed focus on making operations as sustainable and efficient as possible, especially considering that many buildings are not being used to the extent they were pre-pandemic.

But there is also a tough balancing act between making cuts and supporting the University community. A decision to honour promotions at the end of last year, for example, meant that all staff earning less than £100k per year received the pay rises they were due.

The University has also made use of the Government’s furlough scheme for staff that are unable to work due to the pandemic, but is continuing to foot the bill for the 20% needed to ‘top-up’ furlough payments to 100% of each staff member’s salary. A University spokesperson told The Student that there are currently 664 staff on furlough, with 129 on ‘flexible furlough’, meaning that they can work some of the time.

With this in mind, many students will be asking to what extent these considerations extend to them. Already we’ve seen a rent-strike in University-managed accommodation, calling for compensation for teaching which is perceived to be of lower quality, with many arguing that they were “mis-sold” a hybrid-approach to learning.

Somewhat ironically, the way in which the University addresses these concerns could have a direct impact on their finances for the future – the University recognises in their 2019/20 financial report that student experience is a key risk to income, and that “failure to provide a high-quality student experience may negatively impact our reputation, recruitment, and retention.”

A University of Edinburgh spokesperson gave a message to students who may be concerned about the impacts of the pandemic on their education and on the financial stability of the University:

“The University of Edinburgh, like every other HE institution across the world, is having to take important steps to secure its financial wellbeing for the future. Our university was in a stable financial position coming into the pandemic and we are confident that, as we continue to reshape and change the ways we deliver our core mission of excellence in teaching and research, we can navigate our way through these challenging times successfully.”

Whilst the University remains confident in its financial position, whether this confidence extends to the students themselves remains to be seen.

Image: Richard West via Geograph