Financial pressures and financial sustainability

Higher education providers that are registered with us must be financially viable and sustainable. To ensure this, we require regular information about their financial performance and position. This page also lists some measures that providers in financial difficulty should take.

1. Submit financial returns

Providers must submit timely information to us about their latest financial performance and position.

We gather this information through:

• an annual financial return, which includes data about their recent and forecast financial performance and position
• additional requests for information throughout the year as required.

We use this data, along with other sources such as reportable events or notifications, to understand individual providers’ finances and to examine the financial health of the higher education sector as a whole.

2. Report financial risks

Institutions are required to report material adverse events to us, for example if there is a significant financial downturn or if they forecast low levels of cash.

Examples of a significant financial downturn include: 

• a provider not being able to pay its creditors
• an external auditor concluding that the provider may not be a going concern.

A forecast low level of cash could mean a likely drop in the provider’s liquidity to below 30 days’ average expenditure unless this is the provider’s normal cash management policy or it is mitigated through an agreed revolving credit facility, overdraft or other financing.

The report to the OfS should include updated financial and student number forecast tables, a commentary to explain the changes and any mitigating actions a provider is taking to address the changes (if relevant).

We will continue to ask universities and colleges facing large or complex financial risks to submit information about their cashflow more regularly.

3. Engage with the OfS

Providers in financial difficulty should let us know as soon as possible, so we can work effectively together from an early stage to protect the interests of students.

When we need to gain a more thorough understanding about a provider’s financial situation, we will reach out to them and provide support.

We may also support an institution to take necessary action to improve its financial position in order to protect students’ interests.

4. Strengthen governance

The pressures that universities face mean that they may need to consider difficult decisions such as strategic and operational change or cost reduction programmes.  

Boards should consider the impact of such measures on key control functions, such as risk management, internal audit and governance support.

Strong governance that provides scrutiny and challenge is important in this situation. Governing bodies need to have members with the right skills and experience.

They should be familiar with the OfS’s role and responsibilities as a regulator, as well as their own as directors and trustees, and conduct regular reviews of their effectiveness.

They should also respond to challenges in good time rather than leaving a response to a late stage. 

Some boards may wish to consider reviewing their size and composition and push their institution to carry out stress testing.

5. Engage with lenders

Universities should also have a strong and proactive relationship with external partners, such as funders, lenders or other non-academic partners.

They may want to hold early conversations with banks or other lenders about renegotiating any borrowing.

Some banks may be more risk averse than previously so universities should plan for different eventualities.

If a university needs to discuss lending or, for example, a potential covenant breach, they should be aware that this could take longer under current financial pressures.

Universities should make sure that their financial advisers can meet their requirements and have relevant experience of the higher education sector.

6. Protect students and meet other regulatory requirements

Providers should consider the effect that any plans they have to address financial difficulties will have on different students and courses.

They should minimise any disruption. They should also consult with students and make sure students receive clear, accurate and timely information about any changes.

Providers should also make sure that students receive what they were promised when they applied to study.

Where this is not delivered, they take prompt action to put things right and provide appropriate redress to students.

Registered providers must also continue to meet all our regulatory requirements. Anything they do to make sure they are financial sustainable must ensure they also, for example:

• continue to offer a high quality experience for students 
• treat students fairly
• maintain the work they have agreed to address equality of opportunity.