Tuesday 9th September, 2014

According to a survey by Deloitte, universities are set to unleash investment in teaching and student facilities as competition for student numbers increases, despite wariness about the financial and regulatory environment.

Deloitte’s annual survey of higher education finance directors gauged the views of 48 finance directors of UK universities, representing over one-third of the UK higher education sector.

36% of finance directors said they are less optimistic about the financial prospects of their university than 12 months ago. 89% said there is an above normal, high or very high level of financial uncertainty facing their university and 57% say now is not a good time to be taking risks onto their balance sheets.

74% expect operating costs – such as staff, pensions, student support services and maintenance - to increase, up from 69% in 2013. However, 83% of finance directors say they will increase capital expenditure in the next year, up from 43% in 2013’s survey.

To fund this spending, universities are looking for additional finance. 45% of finance directors say they expect a moderate increase in their need for credit in the next 12 months, while 13% say there will be a significant increase in credit. Finance directors did, however, report that credit was both easily available and at a lower cost.

57% forecast an increase in bank borrowing, 51% plan to increase bond issuance and 63% see increases in financial leverage.

Deloitte’s survey also found that 33% of university finance directors believe that government policy on international students has a negative impact on the higher education sector. However, only 5% were concerned about the effect on their institution.

Julie Mercer, head of education consulting at Deloitte said: "Finance directors are wary of the financial environment and favour strong financial management over risk-taking. But, at the same time, ambition and investing for growth are both needed. As such, risk taking is a necessary strategy for universities."