Universities’ research costs shortfall rises again

The difference between the cost of doing research and the income gained from these activities has continued to rise for English and Northern Irish universities, reaching almost £5.5 billion. 

Annual costing analysis by the Office for Students (OfS) shows that higher education institutions in England and Northern Ireland’s aggregated deficit rose from £2 billion last year to more than £2.1 billion this year.

The Transparent Approach to Costing (Trac), which calculates how much universities recover from their economic outlays, showed that universities had a “substantial deficit” in their research activities of almost £5.49 billion in 2024-25, rising by £61 million from 2023‑24, “and follows increasing deficits in prior years”, a report says.

The full recovery rate showed “a small improvement” on last year, rising from 65.8 per cent in 2023-34 to 66.6 per cent in 2024-25. However, this remains “notably lower than” in 2010-11, when the recovery rate for research peaked at 77.8 per cent.

Rising deficits are attributed to increases in operating costs owing to higher staff costs and wider inflationary increases, particularly estates and research facilities. 

“Research activity continues to show deficits exceeding £5 billion, with full economic costs substantially in excess of income; hence research activity is reliant on cross-subsidies from other sources,” it says.

In total, staffing costs, excluding pension provision charges, rose by £942 million (4.1 per cent) to £23,924 million in 2024-25, up from £22,982 million in 2023-24. 

The OfS said this was triggered by “continued inflationary pressures on employment costs” as well as the increase in Teachers’ Pension Scheme employer contribution rates from April 2024 for half of all institutions that return Trac data. These costs are now planned to fall again next year.

Following a tumultuous year of job cuts and large-scale restructures in response to universities’ financial challenges, restructuring costs rose by 46.7 per cent to £243 million in 2024-25, up from £165.6 million in 2023-24. 

Meanwhile, publicly funded teaching incurred a deficit on a “full economic cost basis”, with costs exceeding income by £1,670 million, compared with a deficit of £1,720 million for 2023-24.

Income in 2024-25 for publicly funded teaching was £14,492 million in 2024-25, representing an increase of 1.9 per cent from £14,225 million in 2023-24, but the full cost of such teaching increased by £218 million to £16,163 million – a rise of 1.4 per cent. 

Non-publicly funded teaching, mainly driven by overseas students but also including self-funded students, “continued to generate a significant surplus” of £3,570 million in 2024‑25, rising from £3,282 million in 2023-24.

Despite the negative outlook for universities, operating costs “remained broadly” stable in 2024-25, “increasing marginally by £63.5 million (0.4 per cent) to £16,823 million, up from £16,760 million (2023-24)”.

“The limited growth suggests providers are managing non-pay expenditure more tightly in response to ongoing financial pressures,” the analysis says.

juliette.rowsell@timeshighereducation.com