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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 The information on this website is historical and is no longer maintained.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 Reporting Standards

The report takes into account Financial Reporting Standard (FRS) 102, the new financial reporting framework for higher and further education providers (Note 1). This introduces some significant changes and thus poses some difficulties in comparing financial results between institutions and against historical trends. Some transitional changes reflected in the restated 2014-15 results also make this an atypical year.


In 2015-16, the sector reported a surplus of £1,519 million, equivalent to 5.2 per cent of total income (Note 2). However, at an institutional level, results range from a deficit of 7.2 per cent to a surplus of 32.1 per cent. The gap between the lowest and highest institutional surpluses grew by 26 per cent in 2015-16.

Student recruitment

Early data for the 2016-17 academic year indicates a continuing trend of growing institutional variation. The Higher Education Students Early Statistics survey reports a 0.6 per cent decrease in the total number of undergraduate entrants (home, European Union and non-European Union) but this masks considerable disparity across the sector.

This suggests that it may be challenging for some institutions to achieve the levels of growth projected in their July 2016 forecasts. Without mitigating action, this could have a significant adverse impact on the sector’s income and surplus projections.

Capital investment

Capital investment in 2015-16 totalled £3.8 billion, an increase of 14.5 per cent compared with 2014-15. This level of investment is driven by a small number of institutions, with 18 contributing 50 per cent of the sector’s capital expenditure. A total of 53 institutions reported a decline in capital expenditure over the period.

Investment in infrastructure is particularly important given that in July 2015 the sector estimated that it still needed to invest £3.6 billion  to upgrade its non-residential estate to a sound ‘baseline’ condition. Inflationary pressures on the cost of construction are likely to push this figure higher.

Cash and borrowing

Liquidity (cash and cash equivalents) increased by 7.7 per cent to reach £9.6 billion at 31 July 2016, and total sector borrowing increased by 8.8 per cent to £9.1 billion over the same period. This caused the sector’s net cash position (liquid funds less borrowing) to fall from £548 million to £495 million.

Reserves and pensions

After taking into account pension liabilities, the sector’s unrestricted income and expenditure reserves were £23.9 billion, equivalent to 82.2 per cent of total income. This represents a fall from the previous year, when reported reserves were £24.1 billion (86.1 per cent of total income). The aggregate sector position masks a significant spread of financial strength and a concentration of large unrestricted reserves in a small number of institutions, with just 10 institutions reporting half of the sector’s total reserves.

Reported pension liabilities increased by 33.1 per cent over the year to reach £9.5 billion, and look set to rise further following outcomes of triennial reviews of two of the sector’s major pension schemes, the Universities Superannuation Scheme and Local Government Pension Schemes. These increasing liabilities will add to the pressure on institutions to address any funding shortfalls.

Financial outlook

Overall, the sector reported sound financial results for 2015-16 and its balance sheet remains strong.

The growing levels of uncertainty and risk relating to student recruitment plans, investment programmes and increasing pressure on costs present key challenges for individual institutions and for the sector as a whole.

The sector has a track record of meeting such challenges, though, showing itself to be adaptable to a more competitive and uncertain environment.

In the summer institutions are due to send their next set of financial forecasts for the period up to July 2020, and HEFCE plans to publish a further report, focusing on the future health and sustainability of the higher education sector, once these have been assessed.

Madeleine Atkins, HEFCE Chief Executive, said:

‘Universities and colleges are, on average, reporting sound financial results in 2015-16. However, across the sector we are seeing increasingly greater variation in financial performance.

‘Looking ahead, the sector faces some significant uncertainties and risks that need careful monitoring and mitigation if institutions are to be sustainable in the long term.

‘Higher education in England has a global reputation for excellence in research, teaching and knowledge exchange. It makes a significant contribution to our economy and society. Sustained investment post-Brexit to support a high-quality experience for students and to respond to growing international competition, remains crucial to secure the sector’s long-term financial sustainability.

‘We will continue to monitor the financial position and forecasts closely as part of our commitment to supporting students and the sector in adapting to an increasingly competitive and uncertain environment.’


1. ‘Financial health of the higher education sector: 2015-16 financial results’ (HEFCE 2017/02) provides an overview of the financial results of the HEFCE-funded higher education sector in England. It does not cover further education or sixth form colleges, or alternative providers of higher education.

2. ’Surplus’ refers to the sector’s total income less total expenditure, excluding other gains or losses (from investments and fixed asset disposals) and the share of surplus or deficit in joint ventures and associates.