Principal's Update - University Finances

Principal's Update - University Finances

Dear colleagues,

I want to thank you again for your outstanding work in adapting to our altered circumstances, and give you more information about the serious financial challenge that the University faces for the next academic year - and possibly even longer.

Universities across the globe are unable to say at this stage when their campuses will be able to reopen fully and resume research and face-to-face teaching in the traditional ways. We know from Government that the resumption - when it happens - will be phased and involve physical distancing.

The later in the next academic year that full resumption is possible - and the more students who defer to academic year 2021/22 - the greater the financial challenge we are likely to face in 2020/21. This is partly why we are putting a lot of emphasis on the development of blended learning, so that our students can begin or continue their degrees online, and then join us on campus when it is safe to do so.  

Increasing the number of degrees with January starts will also help mitigate the travel and other barriers faced by students and lessen our financial difficulties.  These steps, however, will not be enough to fill the revenue gap created by COVID-19 in academic year 2020/21.

In recent weeks we have been estimating the impact of the pandemic on our finances for 2019/20 and 2020/21 using assumptions provided by the Scottish Funding Council to all of the nation’s higher education institutions. These assumptions are very similar to estimates we had already worked up. Click here to see the financial impact slides, and here for related FAQs

We will end the current academic year with a small forecast surplus that will help boost our cash reserves, partly because of the actions that we have already taken. These steps include putting a freeze on recruitment for all but a very small number of posts, pausing planned operational spending in areas including our estate and IT, and applying to make use of the Government’s furlough scheme.  

However, it is a different picture for 2020/21. From an analysis of our various income sources, we are predicting a revenue gap of at least £39m which represents 16% of our income. This is the scale of the shortfall we now need to address.

Last week I took a set of Senior Management Team (SMT) proposals to the Court Emergency Powers Group that will minimise the size of this deficit while protecting our capacity to recover from the current crisis and protecting jobs.  

The Court Emergency Powers Group approved the following recommendations which will now be implemented:

  • Pausing work on our plans to redevelop Johnston and Kings, until we understand better the scale of the financial challenges facing the University in 2021/22 and beyond
  • Continuing work on the Science Teaching Hub when the builders are able to return to the site, as we are contractually committed to completing the project and to pause further would incur significant costs
  • Further operational savings of £7m across the Schools and Professional Services Directorates
  • Drawing  down our cash reserves in 2020/21 by £37m, including payments for the Science Teaching Hub.  This will help us greatly to continue to operate even with reduced revenue.  By the end of 2020/21 this will still leave us with a cash balance of £5m.  

It is vital that we retain as much cash as we can in case the situation deteriorates further – for example, if it takes longer than expected to begin our phased resumption of activities, or if there is a further spike in COVID-19 cases that results in a second lockdown.

These steps go most of the way to bridging the gap between our revenue and our remaining spending commitments - but more will still need to be done.

As you may be aware, national pay negotiations for 2020/21 have been paused.  In the current circumstances it is not conceivable that an uplift in pay for the next academic year will be affordable for the higher education sector in the UK.  Therefore, the Court Emergency Powers Group has also approved SMT’s recommendation that this pay restraint applies to everyone in the University for 2020/21 and we have commenced consultation with campus trade unions accordingly.  For the avoidance of doubt the University will ensure that any uplift associated with the living wage will continue to apply.

I deeply regret that it is necessary to do this to protect jobs and thereby to protect our capacity to recover. You have all been working extremely hard to support the whole University and your immediate colleagues - while coping with new and additional pressures in your personal and family lives - so I am keenly aware that the restriction on pay is another unexpected and unwelcome burden forced on us by COVID-19.

All members of SMT have volunteered to play their part in helping to shoulder this burden. I am taking a pay cut of 20% from August 1st for academic year 2020/21, and the other members of SMT are taking a 10% pay cut.

I am grateful to my colleagues on SMT for displaying the strong commitment to the common good and the team spirit that has been typical of the whole University of Aberdeen community during this crisis.

If our financial circumstances unexpectedly improve - for example through substantial extra funding from Government - then we will review the need for restraining pay and maintaining the other restrictions on our spending.

I am very grateful - as always - for your superb work and support for our University.  We all deserve to be living in better times, and we will need to continue to work together with patience and diligence until those days return. 

Best wishes


Professor George Boyne
Principal and Vice-Chancellor

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