Branch Negotiators Financial Report (18 June 2020)

Overview

In 2018/19, Roehampton reported a turnover of just under £140 million, placing it 89th in order of size on that measure but £31m of that results from the deal with QAHE which artificially inflates its student numbers and annual income. That year they reported 20,007 FTE students of whom 9,215 were on-campus (46.1%), 7,474 off-campus (37.4%) and 3,318 online (16.6%).

2018/19 Financial Statement, p. 8

Green “on campus”; Blue “Off Campus”; Grey “Online”. Green has stayed relatively consistent while the main growth in numbers has been off campus and online.

One problem in understanding the finances is this type of discrepancy: the figure above shows 9,215 students on campus which contrasts with the numbers given to negotiators by management. Nor does either figure correspond to the 12,665 also reported in HESA data.

This is important because the main drop in income (apart from the teach-out of part of the collaboration with QA) is a predicted drop in student numbers, the consequences of which were outlined in management’s proposal of 04.06.2020.  Yet the modelling behind such predictions is obscure and does not match that of other HEIs. Roehampton has far fewer Overseas students (where recruitment is predicted to fall far more than for Home students) than most other universities, so is less exposed to that impact from the pandemic. At some institutions international fees represent half of fee income.  It is, therefore, surprising that Roehampton should be one of the first to take such drastic measures to cut spending.

The reason for this appears to be the poor financial shape of the University.  There is evidence that in 2018 -19 and particularly 2019 -20 the University’s position worsened considerably.  In this current year alone, the reserves declined by more than £14m (out of £31m) and in January, long before the pandemic, the predicted surplus was halved.

Partnerships and QA

Over the past few years the University appears to have relied increasingly on ‘partnerships’ with commercial organisations.  These create a great deal of work in terms of moderation, validation and oversight; involve the loss of intellectual property in some cases and also carry reputational risks as the BBC Panorama investigation of QA showed [Link to BBC programme. See minutes 6:20 – 10:20).  It is very unclear whether they are worth the risk. Management have always refused to answer questions on them and both income and expenditure are buried in other figures so that it is not possible to identify them from publicly-available documents. There is, however, some evidence that these partnerships are not particularly advantageous.  The deal with QAHE (the largest), for example, does not appear to be very lucrative for Roehampton. In the last year for which figures are available, Roehampton made £3m (but incurred some expenditure) while QAHE made £8m profit from the arrangement.  The latest accounts for QAHE are three months overdue.

Inequality

Other bad decisions appear to include lack of restraint at the top.  The former VC was not long ago one of the 20 highest-paid VCs in the country.  The University, in addition to generous payments towards his pension will also be paying him an additional pension valued at £195,000.  The current VC takes home less but is still receiving £252,000 / year and – scandalously – enjoys private health insurance for himself and his family, undermining the NHS just as Roehampton begins to offer nursing degrees. Anecdotal evidence suggests that spending on travel and other luxuries has been generous to say the least.  Management has always refused to answer FoI questions about this spending.  Interestingly they have also refused outright to provide information about the salaries of staff paid over £85,000 (people paid individual salaries, off the Roehampton pay scales).  There are, apparently, 43 at least 10 of whom receive more than £100,000, costing the University £5.4m/year.  Negotiators believe that if staff pay cuts are necessary, this group should be reduced in size and its members could afford to pay significantly more than 12-13% currently offered, just as the VC could easily afford more than the 15% he is prepared to sacrifice.

Debt

Undoubtedly the factor that has the greatest bearing on the University’s financial position is the cost of the dramatic building programme on which Roehampton has embarked recently.  In the last few years the University has built a new library and new halls of residence; while this has undoubtedly provided more space and better facilities, it has resulted in the University taking on tens of millions of pounds of new debt. Refurbishing the Harvey building (the old library), now renamed the Sir David Bell building has cost another £20m. Indeed this year alone, the University appears to have spent £15m on building, including an unbudgeted £6m on the Sir David Bell Building, severely depleting the reserves just as the University needs to call on them. This has left the institution dangerously short of a cash buffer before the full impact of the pandemic will be known in September.  Management assured us that the 5% rate of interest was favourable but the same year – 2016 – Bath Spa University borrowed a similar amount for the same term at 4%.

In consequence, an almost unprecedented level of debt has accrued.  In total, Roehampton has approximately £85m of external borrowing. If the QAHE income is excluded then the ratio of debt to income rises to 77% from 65%: only eight UK HEI’s would be more indebted than Roehampton on this more accurate measure. Annual interest on these loans totals £4.2m and roughly £3m is repaid each year, rising to £3.4m by 2022/23.

Worse still, the debt comes with damaging strings attached.  The University had to agree to a number of extremely stringent conditions known as covenants.  These covenants restrict the University’s ability to use the reserves or to set budgets to cope with any reduction in income as will almost certainly be the case next year and possibly the year after.  If these covenants are breached, as looks probable, the bank is highly likely to impose even tighter restrictions in years to come.  This suggests a further squeeze on staffing costs in future years, even if recruitment bounces back.

A building programme spread over a longer period would have been less reckless and would have left the University less exposed when the pandemic hit.

Impact of the pandemic

In July 2019, Roehampton was close to recommended levels of liquidity although this had fallen slightly between July 2018 and 2019. These levels measure the ability of the institution to deal with sudden shocks to income. Unfortunately that cash position deteriorated substantially over the course of 2019/20.

Management’s response to the problems posed by the pandemic has been problematic.  It does look as if student numbers will fall next year, although it is impossible to tell by how many and recent reports have been encouraging.  Academics are making herculean efforts to devise new programmes, to adapt existing teaching to online methods where possible and to encourage students to stay on next year.  Yet management is relying heavily on measures that will hit staff: a voluntary redundancy scheme (now closed), higher workloads and a pay cut across the board.  In their calculations, there will be £8.4m (or £7.8m, depending on the documents consulted) savings in staff costs next year alone and a drop in expenditure on Visiting Lecturers of roughly £800,000 (c. 50% of current expenditure) and nearly £400,000 on Temporary Staff.

Negotiators believe that a significant proportion of these sums has been achieved or identified elsewhere, including £2m savings from people leaving on the voluntary redundancy scheme and at least £2m from the sale of a house.  In the short term, there is also around £2.75m set aside for paying redundancy terms.  In other words, a total of £8.75m out of the £9m needed.

Management insists that £4.5m of pay must be cut from the budget despite this calculation.  UCU does not accept their assertion but acknowledges the parlous state of Roehampton’s finances, not particularly because of Covid-19 but because the spectacular indebtedness of the University made it particularly vulnerable to any variations in income.  Moreover, given the restrictive covenants, it is likely that the attack on staff pay will continue for some time with the possibility of redundancies in the future whether or not staff accept a pay cut.

Similar HEIs.  NB data relate to 2018-19, the latest published figures

income Staff numbers Student numbers Staff costs as % income Premises as % income Borrowing as % income VC’s salary Number paid over £100,000 Number of senior managers
Roehampton

 

£140m 1145 12665 46.5 6.1 64.6 £248,000 10 9
Bath Spa £83m 1280 8000 54 5.9 71 £249,000 5 8/9
Bedfordshire £120m 1145 14000 52.4 4.2 27.4 £217,000 9 11
Canterbury Christ Church £126m 1730 14000 58 5.5 31.5 £265,000 3 11/12
UEL £142m 1490 13400 53 6.7 0.14 £225,000 11 10
Edge Hill £124m 2060 14000 64 5.4 25 £225,000 12 7
University of Greenwich £210m 1265 18945 49.1 7.7 38 £248,000 15 4
Lincoln £165m 2180 16000 57 9.2 55 £242,000 22 15
London Met £88m 885 9200 62 13 0.062 £196,000 7 8
London South Bank £181m 1960 17000 50 7.6 20 £234,000 8 5
Northampton £126m 1440 12000 54 0?? 20 £200,000 5 6
Solent £113m 1290 10000 57 6.5 37 £221,000 7 12
Teeside £145m 1780 19000 62 4 0.37 £229,000 10 8
UWL £110m 1520 11000 46.02 7.08 49.7 £296,000 8 8
Winchester £80 1245 8000 58 4 48.4 £226,000 2 4
Wolverhampton £187m 2490 19000 64 4 2 £284,000 5 7
York St Johns £70m 865 6700 54 5 27 £208,000 2 5

Out of 17 HEIs:  b

Borrowing at Roehampton is 2nd highest (highest if QAHE stripped out) NB Bath Spa has much higher surplus.  After that the highest is 50%

Staff costs at Roehampton are 2nd lowest (but UWL very close – only 0.48% in it) – all others above 50%

Number of staff paid above £100,000 – 6th highest; most have higher staff numbers as well

VC pay joint -5th highest

Numbers earning over £100,000 – 5th highest; Senior managers – data problematic because no common definition: this is indicative only.