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HEFCE closed at the end of March 2018. The information on this website is historical and is no longer maintained.

Many of HEFCE's functions will be continued by the Office for Students, the new regulator of higher education in England, and Research England, the new council within UK Research and Innovation.

The HEFCE domain - - will continue to function until September 2018. At this point we will close the site entirely and all its information will only be available from the National Web Archive.


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Financial health report

Financial Health 2016-17

Read the full report

Surpluses and cash flow

The sector reported a surplus of £1.1 billion in 2016-17, a 28.1 per cent decline compared with 2015-16. This was equivalent to a sector average of 3.6 per cent of total income, compared with an average of 5.2 per cent in 2015-16. This is the surplus reported in the ‘Statement of comprehensive income’, before other gains and losses and the share of surplus or deficit in joint ventures and associates.


Reported surpluses as a percentage of total income by institution

reported surpluses as a percentage of total income by institution

Following the introduction of new accounting standards in 2014-15, surpluses can be more volatile as they are potentially impacted by non-operational influences. Cash flow from operating activities represents an institutions cash generated from operations to meet day to day obligations and is arguably a more reliable indicator of financial operating performance.

Cash flow from operating activities increased from £2.9 billion in 2015-16 to £3.0 million in 2016-17, equivalent to 10.0 per cent of total income (compared with 10.1 per cent of income in 2015-16). Ten higher education institutions (HEIs) reported negative cash flows in 2016-17 (compared with seven HEIs in 2015-16).

Capital investment

Capital investment in 2016-17 totalled £4.2 billion, an increase of 8.6 per cent compared with 2015-16. Despite the substantial level of investment overall, there is significant variation in the level of capital spend between institutions. While the sector’s overall investment was equivalent to 13.9 per cent of total income, at institutional level this ranged from 0 to 94 per cent.

Over the last 10 years, the sector has spent nearly £28 billion on improving its physical infrastructure, excluding expenditure on general day-to-day maintenance. This expenditure has been not only to support the growing student population, which has increased by 12.3 per cent since 2007-08, but also in response to rising student expectations linked to increasing tuition fees.

Liquidity and borrowing

Total sector borrowing increased by 6.9 per cent; from £8.9 billion at 31 July 2016 to £9.9 million at 31 July 2017 (equivalent to 33.1 per cent of income). Over the same period liquidity rose from £9.6 million to £10.4 billion. This meant that the sector did not enter a position of net debt as predicted in the July 2017 forecast.

Actual and forecast levels of borrowing and net liquidity for the period from 2013-14 to 2019-20

Actual and forecast levels of borrowing and net liquidity

Student recruitment

Data from the Higher Education Students Early Statistics Survey (HESES) for the 2017-18 academic year indicates a 0.8 per cent increase in the number of undergraduate entrants compared with 2016-17. Overseas undergraduate entrants increased by 4.5 per cent since 2016-17. This is in line with July 2017 student number forecasts, which predicted an increase of 4.3 per cent in overseas students over the same period.

For the 2018-19 cycle, the latest UCAS application data highlights a 1 per cent decline in applications to English institutions. This is made up of a 3 per cent decline in UK applications and increases of 4 and 12 percent in EU and overseas applications, respectively.

The changes in student recruitment highlighted in the latest data demonstrate resilience by the sector in achieving recruitment targets in an unsettled and changing environment. However the impact of many of the risks are still to play out across the sector fully.


There continues to be significant uncertainties facing the sector which will continue to impact upon the financial health of institutions going forward. These include significant uncertainty as a result of Brexit, increasing global competition, the changing policy agenda, increased competition in the domestic market, as well as pressure on costs, including the outcome of the USS reform proposals. Although the sector has a track record of mitigating against such challenges, showing itself to be adaptable to a more competitive and uncertain environment, these will present risks to some HEIs in achieving financial projections.

Page last updated 23 March 2018