Exclusive:Prestigious Scottish university forced to rewrite financial strategy after 'substantial' deficit increase

One of Scotland’s most prestigious universities is overhauling its financial strategy in the wake of a “substantial increase” in its forecast deficit, it can be revealed.

St Andrews University is the latest higher education institution to raise financial concerns, with its ruling court saying its plans for the next three to five years now need to be “recast”.

Documents show how the university’s fees intake was £840,000 under what was budgeted for 2024/25. This largely appears to be linked to a “significant under-recruitment” of postgraduate students from overseas, which is down by 129 full-time equivalents (FTE) against targets.

However, undergraduate international student numbers at the university, which is the oldest in Scotland and one of the oldest in the English-speaking world, exceeded the target by 90 FTE.

Founded in 1410, St Andrews is the oldest university in Scotland and the third oldest in the English speaking world. (Photo: Peter Thompson/Heritage Images/Getty Images) | Heritage Images/Getty Images

Dame Sally Mapstone, the university’s principal and vice chancellor, wrote to staff in October to say the Fife-based institution was facing a deficit of £4.4 million due to a combination of a shortfall in fee income in the current year - both in-person and digital - inflationary pressures, and a “persistent hangover” from deficits carried in previous years.

This deficit is significantly below the £30m recently reported by Dundee University, and St Andrews is not planning redundancies in the same way as Dundee, Edinburgh or Robert Gordon universities.

However, Dame Sally said: “While this figure [£4.4m] may seem small in relation to our turnover and the financial challenges facing some of our peers, our room for manoeuvre is limited. We must take action now to address this shortfall.

“It is very important to stress that, unlike some institutions, we are not considering redundancies, nor a university-wide travel ban. You may be aware that both have recently been enforced at a number of other institutions.

“We must, however, take steps now to reduce our spending.”

The principal, who is also the president of umbrella body Universities UK, said the institution would implement a “targeted freeze on filling vacant posts” and recruitment, as well as investing in ways to grow income.

A drop in fees from international postgraduate students is impacting universities across the UK, with the cost for last year estimated in Scotland at more than £100m, while this year was expected to be even worse.

The downturn has been blamed on UK government immigration changes and rhetoric. The impact has been particularly damaging north of the Border due to the reliance of universities on fees to cover real-terms cuts to the amount of Scottish Government funding available for the “free tuition” of undergraduates from Scotland.

It has emerged the court at St Andrews University raised concerns at a meeting in October about the financial information it was provided, after being told the predicted deficit was now significantly higher than was anticipated in March.

A minute of the meeting stated: “Members emphasised more generally the need for court to have confidence in the financial information presented, and to be confident that it represented an accurate reflection of circumstances.

“The financial summary detailed a substantial increase in the forecast deficit reported to PARC [planning and resource committee] in March. Additionally, the fees shortfall paper indicated a shortfall of income against budget and identified a number of fee shortfalls.

“This was a potentially problematic, as it undermined confidence in the financial plan.”

The minute added: “Court had to be able rely upon the financial information resented to it, if was to fulfil its duty to make decisions and assessments including of risk.

“Such information had to be clear, consistent, of high quality; accurate; realistic (e.g. in relation to contingencies); be able to identify potential gaps and fluctuations; and to identify and build in the predicted impacts of interrelated factors.

“The potential for change in circumstances and the need to respond to challenges had to be built into financial planning.

“In essence what was required was a recast of the 3-5 year Financial Plan, and a clear understanding of the risks associated with the financial figures, including the extent to which this would impact action and projected plans.”

St Andrews University regularly comes near the top of UK-wide rankings.

Edinburgh University, another of Scotland’s most prestigious institutions, recently recruited a “turn-around specialist” as an interim finance director as it embarks on a cost-cutting programme that may include compulsory redundancies.

Meanwhile, Professor Iain Gillespie quit as principal of Dundee University earlier this month, after revealing the institution faces a deficit of up to £30m.

A spokesperson for St Andrews University said: “The financial challenges facing the sector, especially those relating to long-term under-investment by governments and a significant drop in overseas postgraduate recruitment, are very well documented.

“The principal wrote publicly to all staff in October to set out St Andrews’ financial position and outline the measures necessary to recover it, chief amongst which was a targeted freeze on recruitment and filling vacancies.

“Since then, notwithstanding the additional burden of the rise in employers NI [National Insurance], significant progress has been made to improve our in-year position thanks to the co-operation and support of staff and students.

“We have not had to consider measures such as redundancies or a travel ban, which are being implemented at other institutions, and we are continuing to invest in areas of growth and strategic importance.”

A Scottish Government spokesperson said: “The Scottish Government recognises the significant economic and social contribution of universities, which is why we are continuing to invest over £1.1 billion to support the delivery of their world-leading teaching and research.

“While universities are responsible for their own strategic and operational decision making, the Scottish Government and the Scottish Funding Council will continue to support individual universities, including St Andrews, as they develop their own plans to mitigate their financial challenges.”