Welsh universities ‘not at immediate risk of collapse’

Chris Haines, ICNN Senedd reporter

No Welsh university is at immediate risk of collapsing under the weight of multi-million-pound deficits, according to the head of a public body set up to oversee post-16 education.

Simon Pirotte, chief executive of Medr, which was established in August, gave evidence to the Senedd education committee’s inquiry on issues facing higher education (HE).

Medr, which has a near-£1bn budget, is responsible for funding and regulating post-16 education and research – including colleges and sixth forms, unlike its predecessor Hefcw.

Mr Pirotte told the committee: “I think it’s fair to say… there are massive challenges facing the whole of the tertiary sector at the moment.”

He added: “It’s an incredibly challenging time for institutions across the tertiary sector, every part… HE, local authority schools, FE [further education] colleges, apprenticeship providers, adult community providers – they’re all facing financial pressures.”

‘Tension’

The former Bridgend College principal, who has been in education for around 40 years, emphasised that the “very challenging financial context” is not unique to Wales.

“Almost 100 institutions across the UK have announced restructuring measures,” he said. “So these are challenging times but it’s also essential that institutions cure their financial sustainability and continue to provide those best experiences for learners.

“And I think it’s fair to say that this requires some difficult decisions, including looking at prioritisation and efficiency measures… nobody wants to see job losses and I can say that as a former head of an FE college.

“I know how hard those decisions are and understand the tension between ensuring an institution’s financial sustainability but also considering the human impact.”

Appearing before the committee on May 21, Mr Pirotte told Senedd members he faced similar pressures previously, with increasing costs not met by an increase in income.

‘Scaling back’

“You have to identify additional sources of income and if that isn’t possible, you have to consider scaling back or stopping certain activities,” he said. “And this is the situation facing most institutions in Wales and indeed across the UK.”

Mr Pirotte explained that Medr uses externally audited financial statements to assess the challenges facing universities. “And we do not believe that any institution in Wales is at risk of failure in the immediate short term,” he said.

Pointing to data published by Medr last week, he said universities faced a £61m operating deficit in 2023/24 compared with a £21m surplus in 2022/23.

He told the committee: “This deficit of £61m does not account for the one-off restructuring costs. If you add that in you’re probably talking about a £77m deficit.”

Mr Pirotte, who attended Morriston Comprehensive School in Swansea, said more than half of costs in the sector are associated with staffing.

Cost pressures

“If we take a 2.5% annual pay settlement for HE, that estimates about £22m a year,” he said. “The increase in the employer national insurance costs, that’s another estimated… £20m.

“Employer contributions for teachers’ pension schemes, which particularly affects four of our institutions across Wales, is estimated to cost £6m a year.”

He also raised inflationary pressures, energy costs, increasing cybersecurity risks, a downturn in the number of international students and the loss of EU structural funds.

Mr Pirotte estimated increases in tuition fees to £9,535 a year will generate an additional income of about £36m “but this will not cover the costs”.

He warned that the UK Government’s contentious proposals on immigration have further fuelled concerns among providers around international recruitment.

‘Autonomous’

On proposed cuts to courses, he stressed that universities are autonomous with “subject provision driven by markets, by demand – what students want to study”.

Mr Pirotte said the Tertiary Education Act 2022, which established Medr, specifically states that the body must not use its funding powers to require nor prohibit certain courses.

Natasha Asghar, the Tory shadow education secretary, said: “Medr seems to be the answer to everyone’s prayers but when it comes to the nitty gritties… in relation to feedback to ministers: how much of it is going to be taken on board and actually acted upon?”

Mr Pirotte replied: “We’re certainly listened to – we have good, constructive dialogue.”

James Owen, Medr’s chief operating officer who is a former Welsh Government director, welcomed an additional £28.5m of in-year investment from ministers.

‘Meltdown’

Plaid Cymru’s Cefin Campbell, a former lecturer, questioned how close some universities are to going into administration. “How close are we to some sort of meltdown?” he asked.

Mr Pirotte reiterated: “We’re not saying there’s an institution that is in danger of falling over in the short term but there are medium- to longer-term challenges….

“This is not easy – the reason that they’re taking the actions that they are doing now is to prevent that falling over further down the line.”

Pressed by Ms Ashgar about whether he can see the £77m deficit growing, he said: “Yes is the simple answer but what we don’t know yet is the final impact of the kind of measures that organisations are taking at the moment.

“The future is really challenging… that’s why institutions are addressing the issues now – because they have to, otherwise that situation would get worse.”