Cardiff University said its deficit would rise to £65m in its current financial year if costing saving measures are not implemented. It has also confirmed that the increased employer national insurance contributions will create a £7m-plus annual financial hit, which would far exceed any further rise in domestic student tuition fees.
Like many universities, Wales’ only Russell Group institution, is facing significant financial challenges, particularly from inflationary pressures and a sharp fall in the number of postgraduate international students - due to visa restrictions for family members - who pay the highest tuition fees.
Earlier this year the university's vice-chancellor Professor Wendy Larner said the university was faced with a £30m deficit - the difference between its running costs and income generated (that includes student fees and research council funding).
However, it said at the start of its current financial year - at the beginning of August - its deficit would increase to £65m at year end without taking actions on costs and driving incomes. As a result the university’s governing body, in its council, has agreed a reduced deficit position of £28m at the end of its current 2024-25 financial year.
This will require closing a funding £37m gap, which it said it hopes to achieve by a combination of reducing non-pay related costs, including travel and IT, savings from a voluntary severance scheme, which it will reopen in January, and income from increased student numbers.
It said the end of year shortfall would be made up by using reserves, but that such an approach was not sustainable in the long-term.
The university, for its yet to be signed off 2023-24 financial accounts, after cost-saving measures, has a current standing deficit of £32.8m.
However, at the start of this current financial year it said it was facing a £65m deficit without cost saving measures. The increase was fuelled by a £16m pay award, a £6m cut in grant funding from the ’s funding body for universities and colleges, Medr, and £17m from the impact of inflation on running costs, which have been felt most in energy charges. The university employs around 8,000 staff and has 32,000 students
In an update to staff the university’s chief financial officer Darren Xiberras said the Ƶ’s Government’s decision to introduce a 1.2% rise in employer national insurance contributions from next April will have a £2m impact in the university’s current financial year. However, for its first full financial year of paying the increased tax - 2025-26 - it will rise to more than £7m.
Earlier this year the Welsh Government allowed Welsh University to increase annual tuition fees for domestic students by £250 to £9,250 with effect from the start of the current academic year - in line with England.
The Ƶ Government has since allowed universities in England to make a further modest increase in line with inflation. As a devolved matter the Welsh Government has yet to make a decision on whether to follow suit.
However, Mr Xiberras said: “Even if adopted here (rise in Wales) it would not offset the increased costs caused by national insurance payment increases.”
He added the university has accepted more home students through clearing than previously and that working with the International Study Centre had driven up international undergraduate students.
Figures for the university’s intake of new students, both undergraduate and postgraduate for its current academic year, are expected to be released next month.
The university has reopened a voluntary severance scheme for staff which runs to January. It said it couldn’t give a number of staff who have left voluntarily since the scheme was first launched, until it reports figures to its council next week.
Prof Larner is on record as saying while there are currently no plans for any compulsory redundancies, they cannot be ruled out. Other Welsh universities have also introduced voluntary redundancy schemes.
The University of East Anglia has become the first in the Ƶ to confirm compulsory redundancies. There have been calls for the Welsh Government, while universities are independent businesses, to oversee a new sustainable plan for the sector, including considering possible university mergers and cost-savings through shared services.
said it is aiming to eradicate its deficit. Mr Xiberras told staff: “Council has allowed us to budget for our third consecutive year of operating deficits and we set the budget at a £28m underlying operating deficit.
“We have significant work to do to achieve that budget and get our cost base in good shape so that we are not delivering deficits in 2025/26 and beyond."
While the university has around £427m of cash in liquid assets, much of it is unable to be spent.
It has to pay £400m from a bond issue, that helped finance new building projects, including its Spark campus, in 2055. It has set aside £62m from the bond income to invest into a repayment scheme that has invested in long-term assets that it hopes will grow in value to help meet the liability.
It also has £53m in endowment funds, which are typically invested for the long-term and must be used in line with donors wishes. In other words they cannot be used to plug operational deficits. The university said it will use the remaining interest payable bond money, some £144m, to invest in similar projects to drive “sustainable long-term income streams, enhancing the fabric of the university.”
A spokesman for the university said: “The £65m is how much our expenditure would exceed our income. To get to the £28m deficit (agreed by council) we need to find £37m of savings and/or income. We will do this through making non-pay savings, in areas like estates, IT costs, travel and other procurement savings.
"We have increased the numbers of domestic students recruited to partially mitigate the impact of lower international students.
“We have opened a voluntary severance scheme to reduce our staffing costs. We continue to operate recruitment controls and are only recruiting what are deemed critical posts. The university is reducing its reserves to finance these deficits. However, it is not a position we can sustain indefinitely which is why we need to reduce our cost base in the short-term and aim to grow our income sustainably over the medium-term.”
