EDUCATION: COVID-19: Colleges and Universities are facing possible financial disaster

COVID-19 upends the college experience in the USA – Video

ABC News’ Terry Moran reports on college students pushing for tuition refunds during the pandemic, while some universities face financial pain.

EDUCATION: UK universities facing possible financial disaster, research says

After-effects of coronavirus outbreak could affect one in 20 students and cause steep job cuts

New graduates at a UK university.
 Estimates found that the UK higher education sector will endure losses of between £3bn and £19bn in 2020-21. Photograph: Bailey-Cooper Photography/Alamy Stock Photo 

As many as 13 British universities could face financial disaster from the after-effects of the coronavirus outbreak, affecting one in 20 students in the UK and causing steep job cuts, according to research.   

Estimates by the Institute for Fiscal Studies found that the UK higher education sector will endure losses ranging between £3bn to £19bn in 2020-21, with the exact size of the losses dependent on how many students decide not to enrol.

The IFS calculates that pension obligations and investment losses caused by the economic downturn will also have a major impact on university balance sheets over the next four years.

STAFF REDUNDANTCY EXPECTED

Universities will be unable to recoup their losses through cost-cutting unless they also make “significant” numbers of staff redundant, the research found.

Although the IFS did not name the 13 institutions most at risk, the authors suggest that those with the lowest reserves and smallest investments will need a government bailout or debt restructuring to survive.

“It is not the institutions with the largest Covid-related losses that are at the greatest risk of insolvency. Rather it is those, generally less prestigious, institutions that entered the crisis in a weak financial position and with little in the way of net assets, which are at greatest risk,” the IFS stated.

Universities with the largest predicted losses under the IFS’s analysis were “highly profitable” before the crisis and have substantial financial reserves, allowing them to sustain significant drops in income.

ENROLLMENTS WILL FALL….  INVESTMENT CUTS EXPECTED

The downturn in financial markets will also likely hurt finances. The IFS estimates that universities will need to increase their pension provisions by 25%, while investment income is expected to fall by 10%.

The IFS also offers two more scenarios, including a “pessimistic” scenario with £19bn in lost income, thanks to much larger falls in student enrolments and a more severe market downturn widening pension fund deficits and reduced investment income. The “optimistic” scenario of a £3bn loss includes a 25% fall in international and EU enrolments and no additional pension provisions required.

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