ABERDEEN University’s accounts reveal “significant doubt” has been raised over its future as a result of a series of financial pressures and uncertainties.
The ancient institution – which has made headlines in recent months over proposals to axe the modern languages department – suggested it could not guarantee it would be able to continue as a going concern for the next 12 months.
Aberdeen University was founded in 1495, making it the third-oldest university in Scotland and the fifth-oldest in the UK. It is one of the only universities to offer Gaelic as a degree.
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In its most recent set of annual accounts and report, 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.
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 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”.
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.
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"Given that approximately 60% 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.
The university faced severe backlash last year when it announced plans to axe modern languages courses and jobs, with more than 18,000 people signing a petition urging a rethink.
It has since opened a voluntary severance scheme, with members of the local University and College Union (UCU) branch announcing they intend to launch a “formal dispute” over the university’s failure to rule out compulsory redundancies for staff.
Aberdeen’s 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 staff costs by £12m”, with 240 applications for voluntary severance and enhanced retirement schemes.
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.
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“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.”
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