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1. This report provides an overview on the financial health of the higher education sector in England. The analysis covers the 2009-10 financial results and 2010-11 budgets, as submitted to HEFCE in early December 2010. The report is being published to provide universities and higher education colleges with feedback on their financial performance in 2009-10 and original estimates for 2010-11 before they submit their updated financial forecasts in April 2011 (as requested in HEFCE Circular letter 07/2011). The analysis also provides stakeholders with information about the current financial health of the sector.

Key points

2. Higher education institutions (HEIs) in England are required to send us their annual accountability returns in December each year. These returns form a significant part of the way in which HEIs can demonstrate accountability for the public funds distributed to them. The accountability returns enable HEFCE to reassess HEIs' overall risk assessments and to ensure that HEIs are meeting their accountability responsibilities.

3. Due to the uncertainty over the future funding climate, we gave institutions an option to defer forecast information for the period 2011-12 to 2013-14 until April 2011 (see HEFCE Circular letter 27/2010). Eighty-five institutions decided to defer submission until that time.

4. All institutions were required to provide their financial results for 2009-10 and their budget position for 2010-11. It should be noted that the 2010-11 figures were submitted to HEFCE before further reductions in the HEFCE funding for 2010-11 were confirmed by the HEFCE Board in January 2011.

5. The overall financial results for the sector in 2009-10 show a stronger financial position than previous years. On a number of key indicators the financial results are the best on record. At the end of 2009-10 the sector had strong cash balances and healthy reserve levels, which will provide some cushion for the likely risks the sector now faces. There is also evidence that many institutions have taken the opportunity to restructure their cost bases ahead of the pressures on public funding.

6. The projected performance in 2010-11 is sound overall, albeit not as strong as 2009-10. Cash levels are expected to remain strong, which is important as the sector enters a potentially difficult year in 2011-12. However, as already noted, the 2010-11 projections were made before further reductions to HEFCE funding were announced in January 2011.

7. We will publish an update on the financial health of the sector when we have received and analysed all HEIs' financial forecasts for the period 2011-12 to 2013-14.

Action required

8. No action is required: this report is for information.

Date: 1 March 2011

Ref: HEFCE 2011/06

To: Heads of HEFCE-funded higher education institutions

Of interest to those
responsible for:

Audit, Estates, Finance, Governance, Management, Planning

Enquiries should be directed to:

Nolan Smith, tel 0117 931 7376, e-mail