How Edinburgh University bosses are planning cuts and recruitment controls as running costs hit £100m a month

Staff at Edinburgh University are seeking answers after being told bosses plan to cut spending and implement “significant constraint” on recruitment.

Sir Peter Mathieson, the principal of the prestigious institution, has written to staff outlining the “severity of the financial challenge” in the higher educations sector.

He said Edinburgh was “not immune” to the pressures, but was taking action to respond, including “reducing our spending in all areas”.

In the memo, seen by The Scotsman, Sir Peter blames “systemic issues with our sector funding model”, with government funding not fully covering the tuition costs for UK students, while research usually costs more than it brings in, ensuring institutions rely on the fees of international students.

However, international student numbers are falling, which Sir Peter said was in part as a result of the impact of “recent UK government policy changes and rhetoric around student visas and immigration”.

He wrote: “We are in a better financial position than many other universities, and demand for places from applicants remains high, but we are not immune to the sector challenges, and we must take actions to ensure we remain financially resilient.

“Tuition fees account for 37 per cent of our total income. Like many other universities, we did not meet our recruitment targets in 2023-24 and this led to a shortfall against our projected tuition fee income.”

The Scotsman previously revealed how the number of students from overseas enrolling in taught postgraduate courses at Scottish universities was down by more than 20 per cent in the 2023/24 academic year, although the proportion varies by institution.

The email also said Edinburgh University’s running costs had been £90m per month in 2020, but had now risen to £100m per month, while the workforce has “grown by roughly 750 full-time equivalent staff in the last year alone”.

Sir Peter said: “Together, these factors mean our expenditure is rising at a faster rate than our income. This is an unsustainable trend.”

To address the pressure, he said leadership teams were working to “identify ways to reduce spending”, and that the university would “implement significant constraint on new and replacement staff recruitment for the foreseeable future”, with new staff appointments only to be made in “exceptional circumstances when roles are critical to our university mission”.

The principal concluded: “I realise this may be a difficult message to hear. My hope is that this email reassures you that we are taking action to adapt to the sector-wide challenges and continue to deliver and enhance the world-class research and teaching that is our core mission.”

It is the latest example of the escalating pressures in Scottish and UK’s higher education sector, with The Scotsman revealing Aberdeen University faced significant doubts over its future earlier this year, and that the University of the Highlands and Islands (UHI) is embarking on a controversial restructuring and amalgamation.

Staff at Robert Gordon University, in Aberdeen, are being balloted for industrial action over compulsory redundancies, meanwhile.

It also recently emerged that Sir Peter, who earns a salary of £348,000-a-year, a total package of £418,000, and has his Regent Terrace home and bills covered by the university, regularly stays in five-star hotels while on overseas trips.

In total, 343 employees at Edinburgh University are paid more than £100,000, including clinical staff.

Last year, the university’s total income, including capital grants, grew to a record £1.4billion, while it had total reserves of £2.6bn, and an EBITDA (earnings before interest, taxation, depreciation and amortisation) of £148m.

Expenditure in 2022/23 hit £1.227bn, with staff costs accounting for more than half, at £705m. A spokesperson from UCU union’s Edinburgh branch committee said: “UCU Edinburgh is still seeking greater transparency from university management on the rationale for the scope and placement of budget cuts, given the university's relatively strong financial position.

“While we are glad to be reassured by university management that there are no planned redundancies, we recognise that in such a climate, our members on casualised contracts are at greater risk of losing work, whilst permanent staff across academic and professional services roles continue to face ever-increasing workloads.

“These pressures will only be exacerbated by the university's current position on recruitment and will have a detrimental effect on student learning conditions as well as staff working conditions."

A university spokesperson said: “The University of Edinburgh is affected by the same headwinds and challenges as the wider UK higher education sector.

“It is in that context that we are taking steps to manage our overall expenditure to ensure our longer-term financial resilience.”

As Sir Peter outlined in his email, the pressures in the higher education sector are not confined to Scotland.

The Guardian reported on Friday that several institutions in England could reach a financial “tipping point” this autumn as institutions desperately battle to increase the number of students from south of the border, to plug shortfalls in international recruits.

In June, MSPs on Holyrood’s education committee heard evidence from Karen Watt, the outgoing chief executive of the Scottish Funding Council, which oversees universities, who said that the sector in Scotland “is not particularly overexposed on debt at this time”, compared to some in England.

Professor Iain Gillespie, Dundee University principal and convener of Universities Scotland, was asked if Scottish universities were likely to face closures.

He said: “The answer to that is no, because we have the ability to mitgate the financial pressures right now.

“If the decline in international student numbers and no change in the funding model continue for the next two or three years, risks will increase, and we will be likely to see universities really struggle to deal with the financial challenges.

“I cannot comment on whether there will be failures - that is for them - but the problems will accumulate, and they are accumulating.”

Last week, Sir Peter revealed how Edinburgh University, and others, carried out modelling in 2020 to prepare for the impact of losing income from international students during the early days of the Covid pandemic. They found “universities would be rapidly bankrupt if there was not mitigation”. In an article for the Policy Institute at King’s College London, he also outlined six ways the new UK government, and its Holyrood counterpart, could help the higher education sector flourish, including taking international students out of net migration targets, keeping and extending the graduate visa, and “adequately” funding the education of home students.

Meanwhile, new UCAS statistics show acceptances to Scottish institutions for home students have increased by 7 per cent to a new high of 31,220 this year.

There has also been a 12 per cent increase in acceptances from the most deprived areas in Scotland to all UK universities, up 540 on last year to a record 5,080.

The overall number of acceptances to Scottish universities is 35,930, an increase of 1,910, or 6 per cent, since last year.

The Scottish Government has said it is investing more than £1bn in teaching and research, including an increase in funding for research and innovation, despite facing the most challenging budget since devolution.