Severance spending at top UK universities surges

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More than a third of Britain’s elite universities had to make further staff cuts last year, while severance costs at the Russell Group rose by more than a fifth, according to a Financial Times analysis.

24 to ten universities The group said they were launching voluntary redundancy schemes in 2024, offering staff compensation packages in exchange for voluntary redundancies.

Redundancy payments soared after sharp cut in overseas students An analysis of annual financial statements showed that the 22 Russell Group universities paid a combined £70m last academic year, a 29 per cent increase on the £54m spent in 2022-23. Two universities did not provide data.

The findings highlight the vulnerability of higher education institutions to the growing financial pressures of the sector.

The Russell Group cuts reflect cost-cutting across the sector, which has led to universities announcing course closures and travel and entertainment bans, as well as staff cuts.

Russell Group chief executive Tim Bradshaw said the cuts were needed to make institutions financially sustainable, but argued the government needed to do more to help the sector, whose research is integral to the UK’s growth and innovation agenda.

“Along with the steps taken by universities, we need the government to help ensure a sustainable higher education funding system,” he said.

Vivienne Stern, chief executive of Universities UK, a major sector lobby group, said the tightening of belts was a sign that institutions were getting their houses in order, but there were potential risks.

“The danger is that no one looks at the overall implications and the risk that you develop systemic problems,” he added.

Repeated layoffs have damaged staff morale, union spokesmen added. Joe Grady, general secretary of the University and College Union, which represents lecturers, said “year after year of cycles of restructuring and cuts” had failed to deliver sustainability.

The Department for Education said it was taking “tough decisions” to stabilize universities at a time when state finances are tight, adding that the Office for Students regulator was closely monitoring the sector’s financial stability.

“While [academic] institutions are autonomous, we are committed to re-establishing universities as engines of opportunity, growth and aspiration,” he added.

Paul Catt, senior adviser on education at PwC, said consolidation in the sector threatened more expensive and less popular courses. such as chemistry, while also leading to the provision of potential ‘cold spots’.

Stern said the sharp decline in international students, who typically pay three times the UK’s annual fees of £9,250, had blindsided universities, which had previously been encouraged to recruit internationally to offset a decade-long tuition freeze.

Applications for UK study visas fell from 474,000 in 2023 to 408,000 in 2024, according to Home Office figures, following the previous Conservative government’s decision to remove the right for postgraduate students to bring family members.

The situation was exacerbated by the currency crisis in Nigeria, a key growth market, and competition from other popular destinations such as Australia and the US, which reopened after the Covid-19 pandemic.

Report The OfS estimates a £3.4 billion fall in net income across the sector by 2025-26, with almost three quarters of universities predicted to be in financial deficit.

A total of 4,900 staff from 21 Russell Group members received severance payments in 2023-24, an increase of more than a fifth on the previous year. Cardiff, Edinburgh and Glasgow did not release details of the number of staff receiving the payments.

Since the start of the pandemic, the group has spent more than £348m on plans to cut prices until 2023-24, when many international students have been banned from travelling.

Nottingham and Newcastle had the biggest increases in payouts, paying almost £14m and almost £6m respectively to ex-employees, nearly 10 times the previous year.

Staff cuts and recruitment freezes at Newcastle were accompanied by bans on overtime, external hospitality and travel.

Newcastle said its higher severance costs were partly due to the closure of the accommodation block. Nottingham declined to comment.

Exeter has also significantly increased its severance fee to £8.8m, up from £1.3m in 2022-23, blaming frozen tuition fees and falling numbers of international students.

“At Exeter, we anticipated these challenges and acted proactively, taking concerted action across our operations to ensure we maintain our strong financial position,” added a university spokesperson.