Covid-19 - Staff Update - protecting our financial sustainability

Staff Update - 8 April 2020

Dear colleagues,

In the last two years - thanks to the individual and collective efforts of the University community - we have achieved a financial turnaround. We shifted from a projected deficit in 2018/19 to a small surplus and are on track to repeat that in 2019/20 despite the current crisis.

If we had continued as expected along the same path - and had the world not changed so calamitously in recent weeks - we would have achieved our target of at least break even for 2020/21.

This was mainly due to the very high growth in international student applications and acceptances of offers of a place at our University. Our international fee income was forecast to grow from £41M this year to over £50M in 2020/21 - or roughly 20% of our total revenue.

However, that international fee income is now likely to fall substantially, because of the restrictions and uncertainty created by coronavirus. Already we are seeing evidence globally of international applicants wishing to defer their studies by a year, and some being unsure whether they wish to study abroad at all.

In addition, we are unable to say with any certainty when the circumstances will be right for any students to be on campus, whether they are from Scotland, the rest of the UK, continental Europe or the rest of the world. This will impact negatively not only on our tuition fee revenue, but also our income from campus services such as accommodation and catering.

As a result of all of this, the overall financial position of the University for 2020/21 is now under very serious pressure.

Indeed, it is difficult to see how this pressure can be avoided unless the University sector receives substantial extra grant support from Government. Both Universities Scotland and Universities UK are undertaking excellent work to communicate to our governments in Edinburgh and London the scale of the financial challenge faced by higher education institutions. As yet, our governments have not been able to provide a concrete commitment to offer that support.

With uncertainty over how long our students could be away from our campuses, together with associated impacts in other areas such as lost research income, our primary objective must be to protect our capacity to respond when student recruitment and other activity returns to normal - as we currently expect for academic year 2021/22.

This means that our top priority is to protect jobs.  

We have already taken some important steps to achieve this:

• freezing staff recruitment for the foreseeable future bar a very small number of business-critical appointments.
• suspending capital expenditure and all non-essential operating expenditure.

In addition, at a sector level, a pause has been put on pay negotiations for 2020/21, and USS Trustees have agreed that while the USS pension scheme has breached key stress triggers due to the fall of the value of investments during the current financial crisis, no additional contributions for employers or staff will be required before the 2020 valuation of the scheme, currently underway, has been completed next year.

Another positive development has been the introduction of the UK Coronavirus Job Retention (Furlough) Scheme.  The University and Campus Trade Unions are working together to examine how the University can make best use of the scheme.  The terms of the scheme will allow the University to claim back 80% of salaries - up to £2,500 per month per employee - of staff who are unable to carry out any of their normal duties in the current circumstances.

Over and above the requirements of the scheme, the University will continue to pay the remaining 20% of salary for staff who fall into this category. This will be reviewed on an ongoing basis to ensure that, should there be any changes to the Government scheme, the University responds to this in an appropriate manner. (FAQs on our finances and furlough are available here).

Without extra Government support, however, the adjustments listed above will not be enough to protect the scale of activity and achievements of the Higher Education sector.  

Given the unknowns surrounding the pandemic and its timescale, further measures are currently under consideration to ensure we are in a position to mitigate our financial challenges and achieve our primary objective to protect jobs.

In addition to controlling our expenditure, we also need to make every effort to maximise our student fee income in 2020/21. We need to be ready to begin the autumn semester by delivering our programmes online.

We are also taking steps to ensure overseas students unable to join us - due to ongoing travel restrictions or not having secured entry qualifications in time - will be able to do so in January, either on campus or online. A taskforce is being set up to oversee these preparations.

Steps are also being taken to maximise our research income by responding rapidly to the calls for research projects to tackle coronavirus and its impacts.

These are challenging messages to convey - and you can read more of the sector’s position here - but let us stress once again that our number one priority is to try to protect jobs during these unprecedented times.

Finally, can we remind you of the successes we have achieved together over these last two years. Our adaptability and collective effort can give us every confidence that we are capable of recovery and further success once the pandemic is firmly behind us.

Best wishes

George, Karl, Debbie and David