Exclusive:Aberdeen University warned of 'significant doubt' over future amid financial pressures

‘Material uncertainty’ over institution’s ability to continue as going concern

Aberdeen University’s accounts show a “significant doubt” was raised over its future as a result of a series of financial pressures and uncertainties.

In a sign of the scale of the troubles mounting in the higher education sector, the ancient institution suggested it could not guarantee it would be able to continue as a going concern for the next 12 months.

The university highlighted “external uncertainties” - such as rising costs, falling numbers of international students and a cut in Scottish Government funding - which it said created a “material uncertainty” over its ability to deliver its financial recovery plan, achieve key targets and meet the terms of a recent refinancing package.

In its newly-published annual report and accounts, the university said this “may cast significant doubt over the ability of the university and group to continue as a going concern”.

Organisations are required to detail any such uncertainties and doubts under international accounting rules. The warning has been described as “unthinkable” by Conservative education spokesman Liam Kerr.

However. the university said a recent recovery plan was helping to cut costs by £18.5 million, ensuring it is on “a firm financial footing for the future”.

It said management was “very confident that with continued agile, effective action we will survive and thrive, whatever the challenges facing the higher education sector”.

The institution’s ruling court also said that whilst it recognised the uncertainties, it believed the university would be able to “achieve the requirements”, meaning the financial statements were prepared on “a going concern basis”.

Founded in 1495, the University of Aberdeen is the third oldest in Scotland and the fifth oldest university in the UK. Its principal, George Boyne, recently called on the Scottish Government to reverse a £1.6m reduction in the university’s teaching grant.

He also highlighted a 24 per cent cut to the Research Excellence Grant from 2021.

The university’s financial documents reveal that a fall in international student recruitment, which has been linked to UK government immigration changes, led to a “net shortfall in income” last year, which would have meant the university “would not be in a position to meet (its) debt service covenant test for financial years 2023/24, 2024/25 and potentially for 2025/26”.

A financial recovery plan was agreed in December, which included a “refinancing package” with the university’s banks. However, the situation has worsened since then in relation to funding and international students.

Signalling the potential for fresh reductions to staff numbers, the report said: “A range of measures have therefore been identified that result in further savings, meet covenants, and return the university to a stronger financial position.

“These range from a review of our estate management, disposal of surplus to requirement assets and a reshaping of the professional service directorates to adapt to changed demand and volumes of activity. Given that approximately 60 per cent of total expenditure relates to staffing, it is inevitable that further options around levels of pay and the size and shape of the university must also be considered.”

The accounts also show £3.5m of costs incurred on an abandoned campus redevelopment had been written off by the university.

The refinancing package resulted in the repayment of £30m of bank loans, using funds previously earmarked for the redevelopment of the King’s campus, replacing this with a revolving credit facility.

Aberdeen University faced a backlash last year over plans to axe modern languages courses and jobs, with more than 18,000 people signing a petition urging a rethink.

Local student newspaper, The Gaudie, reported that senior vice-principal Karl Leydecker informed staff last week the university was “getting closer to achieving its goal of reducing staffing costs by £12m”, with 240 applications for a voluntary severance and enhanced retirement schemes Neighbouring Robert Gordon University is also running a voluntary severance scheme, as it bids to try to save £18m, while the University of the Highlands and Islands is drawing up plans for a restructure.

Business leaders recently warned the international standing of Scottish had been put “at risk” by budget cuts and immigration changes.

Mr Kerr, a north-east MSP, said: “It’s unthinkable that one of our ancient universities should feel compelled to issue this kind of warning. University teaching budgets have seen a cut approaching £30m and 1,200 funded places have been axed under this SNP Government.

“The SNP’s abysmal record on education – their supposed priority – over 17 years is their abiding shame. But it’s our leading universities, today’s students and Scotland’s future prosperity that are paying a heavy price for that neglect.”

Aberdeen Central SNP MSP Kevin Stewart said: “The University of Aberdeen are being completely open and transparent about the situation that is facing universities right across the UK, about future funding coming from overseas students, which many of our universities rely on.

“And if the UK government does not change its position on immigration, when it comes to students and their families, then that will put our higher education establishments in precarious positions.

“In my opinion, every institution should be following the University of Aberdeen’s lead and highlighting this awful scenario that they are facing, which is entirely down to the UK government’s incoherent and inhumane migration policies.”

A University of Aberdeen spokesperson said: “The annual report, which we began drafting some months ago, sets out the potential risk, if the University of Aberdeen had not taken swift highly effective action to address financial challenges.

“The university has now reduced costs by a hefty £18.5m and is consequently on a firm financial footing for the future. Our financial situation has radically changed because of early retirement, voluntary severance and operational efficiencies, as well as a major drive to grow and diversify our income.  

“The term ‘material uncertainty’ reflects the position reported by Universities UK that the higher education sector faces additional challenges as a result of the current migration policy, which has caused a steep decline in income from international student fees. 

“The University of Aberdeen has been around for over 500 years. We are very confident that with continued agile, effective action we will survive and thrive, whatever the challenges facing the higher education sector.”

A Scottish Government spokesperson said: “Our universities play a pivotal role in Scotland’s economy and society – and despite facing the most challenging budget since devolution, the Scottish Government will invest over £1 billion on teaching and research, including an increase in funding for research and innovation. This will ensure our universities continue to play a pivotal role in Scotland’s economic growth.”

On January 1, the UK government banned international students from taking family members with them when they come to study in the country, unless it was for postgraduate research courses and courses with government-funded scholarships.

Home secretary James Cleverly said “ending the unreasonable practice” would help cut migration by the tens of thousands of people, and contribute to an overall strategy of preventing 300,000 people from coming to the UK.

There are now concerns the Westminster government could deal universities a further blow by scrapping the graduate visa route. Prof Boyne recently signalled he believed a Labour victory in the next Westminster election could help reverse a recent downturn in the number of international students within five years.