Recent figures released by the University of Edinburgh show that finances are on an “unsustainable” footing.
Principal and Vice-Chancellor, Sir Peter Mathieson blamed the University’s financial difficulties on inflation, challenges with international student recruitment, and the “inadequate levels of funding for Scottish domiciled and other UK students.”
The Annual Report and Accounts for the year up to 31 July 2024 showed that Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA – a standard measure for profitability) fell from £128m to £84m.
The University aims for EBITDA to be 7-9 per cent of total income, but failed to meet this “financial sustainability target” by over £25m.
Despite the University’s total income remaining greater than total spending, consistently rising expenditure is a cause for concern.
The cost of running the University has been growing since 2021/22, with expenditure growing by over £200m in this time.
In 2023/24 total expenditure grew by 10 per cent – overshadowing the relatively low 3.5 per cent increase in incomes.
At present, the University forecasts that expenditure growth will continue to outpace any rise in incomes.
If total expenditure and incomes continue to grow at their current rates, the University will be running a deficit within two financial years.
Lee Hamill, Director of Finance at the University of Edinburgh until December 2024, said the University was facing “a financial challenge greater than in any recent times.”
However, Hamill did express confidence “in the financial sustainability of the University,” despite “this trend [of costs rising faster than income] being unsustainable over a prolonged period of time.”
While deficits are not ideal, the University’s net assets (assets minus liabilities) are valued at £3.1bn, meaning it could support itself in the event it fails to balance its books.
As well as costs rising, incomes are being squeezed. The declining numbers of foreign students studying in Scotland, and real-term cuts to higher education spending means nationwide funding per-student has fallen by 20 per cent.
In November 2024 Sir Peter Mathieson announced plans to combat financial challenges involving “selective voluntary and, if unavoidable, compulsory redundancies.”
The University and College Union have criticised the University’s “crisis narrative” – claiming the data has been manipulated in order to justify staffing cuts.
UCU also claims that EBITDA “is a terrible indicator of the financial health of the university” and accused senior management of overemphasising the significance of the rise in Employer’s National Insurance contribution.
The University estimates that the tax increase will cost £5m in 2024/25 and £12m in future years. This amounts to an increase of 1 per cent in total costs.
“McEwan Hall roof from National Museum of Scotland” by GB_1984 is licensed under CC BY 2.0.