There are suggestions of serious financial concerns at a handful of English universities worried about breaching their banking covenants, with government made aware of the situation, as ministers are urged to recognise that “a major university going bust would be a very real difficulty for everybody”, including themselves.
The funding crisis – combining real-terms cuts in funding for domestic students under the frozen fee cap with early signs of a fall in overseas student numbers – is now having an acute impact. There are suggestions in the sector that a small number of institutions are concerned about the possibility of breaching their covenants on borrowing with their banks, which require institutions to maintain certain levels of financial performance.
Breaching covenants could leave an institution unable to class itself in its accounts as a “going concern”, able to meet its financial obligations for the next 12 months.
Until now, the sole message on potential institutional failures from government and the English regulator, the Office for Students, has been that there will be no “bailouts” for universities. But the level of financial challenge across the sector and complexity of a potential major university failure requires a fuller strategy from government, according to senior figures.
