hee news
Capital expenditure cuts planned at 25% of universities
THE latest report from the Higher Education Funding Council for England (HEFCE) on the financial health of the sector shows a big gap opening up between the capital expenditure plans of the best performing and those of less well performing universities. Nearly a quarter of higher education institutions are planning to cut their capital expenditure in the period up to 2019-20. The sector as a whole is expecting to
increase investment in its estate significantly, with projections showing capital expenditure in excess of £19.4bn (2016-17 and 2019-20). This is equivalent to an average of £4,842m million per annum, a 48 per cent rise on the previous four-year average, which was £3,269m (2012-13 to 2015-16). However, nearly a quarter of HEIs in the sector are forecasting lower capital expenditure over the forecast period. By contrast 18 institutions are planning capital expenditure that accounts for half of the
sector’s total. Among the factors likely to impact on
the sector’s future financial performance and capital expenditure is the increase in pension liabilities. The triennial valuation of the sector’s largest pension scheme, the Universities Superannuation Scheme, is still in progress and has provoked uproar across campuses. Any increase in liabilities will add to the pressure on institutions to address any funding shortfalls. A further factor is inflationary pressure across the sector’s cost base, which will need to be managed in order to maintain financial sustainability. The HEFCE notes that the growing
uncertainties faced by the sector as a result of the UK’s decision to leave the EU, coinciding with increasing competition in the global higher education market, will lead to a greater focus from investors on the underlying financial strength of HEIs. Consequently, any fall in confidence levels could restrict
the availability of finance in the sector and put significant elements of the investment programme at risk. Falling confidence levels could also lead to a rise in the costs of borrowing. With significantly reduced levels of
publicly funded capital grants, HEIs will need to generate surpluses and operating cash inflows to sustain the level of capital investment needed to attract students and staff, and ensure their long- term sustainability. In the short term this level of capital investment is affordable given the cash reserves held by the sector; however, the sector will be unable to sustain it unless institutions generate increased surpluses. A reduction in capital investment could lead to significant under-investment in the sector, with institutions that fail to invest sufficiently in infrastructure finding themselves in a weaker market position and at higher risk of financial instability from reduced recruitment.
Record number of new student bed spaces delivered last year
ACCORDING to the latest Cushman & Wakefield student accommodation report, there are now 602,000 purpose- built bed spaces available to students for the current academic year. Of these, 87% of all new bed spaces for 2017/18 have been delivered by the
private sector, with a record number of 30,000 new bed spaces delivered in 2017. Cushman & Wakefield says the market
continues to evolve apace, with last year seeing the largest ever increase in one year. Over the same period, almost 8,000 beds have been taken out of use to be
refurbished or repurposed. Universities still provide the largest number of bed spaces, offering 57% of all rooms available in 2017/18, with the private sector providing the remaining 43% of beds – up from 41% in 2016. The percentage of standard bed spaces
has now fallen to 30% of the market, whilst studios now account for 12% of all beds. The composition of beds offered by the two providers is markedly different, with 43% of all university beds standard, compared to only 12% of those offered by the private sector. Conversely, 24% of all beds offered by the private sector are now studios, compared to only 2% of university rooms. En-suite and studio bed spaces continue to dominate developments, with the former accounting for 52% of all new beds available for 2017/18, and the latter for 43%. 97% of all studio bed spaces were delivered by the private sector. This room type has grown by 106% since 2014.
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