Government Support Package Announcement
Following on from our recent blog on 30th April 2020, below we summarise the UK government’s recent announcement of funding to the higher education sector and what this could mean for purpose built student accommodation (PBSA).
Set within a nationwide context where virtually every sector in the UK is experiencing some form of distress and financial difficulty, the UK government has published a series of measures dedicated to the higher education sector that are intended to help sustain universities and provide stability to prospective students over the coming months.
These measures show the UK government recognises higher education as a major contributor to the economy. Universities UK previously reported the sector generates in excess of £95 billion for the UK as well as being one of the largest exports the UK has to offer.
Support Package Overview
On 4th May 2020, the UK government published details of its support package for universities and students. Key components of the package are set out below:
- Income is being “brought forward” to help universities with cashflow and to manage financial risk. An estimated £2.6bn of tuition fee income and £100m of research funding will be made available to universities sooner than typically scheduled.
- The Treasury confirmed universities will have access to business support schemes which could be worth a further £700m. This includes business loan support and the Coronavirus Job Retention Scheme.
- Student number controls will be introduced on a temporary basis. English universities will only be permitted to recruit UK and EU students based on their pre-covid19 forecast numbers plus 5%.
- Student number controls do not apply to non-EU students. Government ministers are working to ensure universities are still able to attract international students. This includes considering how the International Education Strategy can be updated to respond to the impact of COVID-19.
- A further 10,000 university places are available at the Government’s discretion, with 5,000 ring-fenced for nursing, midwifery or allied health courses.
- A series of measures to support students will be implemented including an enhanced UCAS Clearing process – “Clearing Plus” and financial help for students experiencing hardship using existing funds.
- The UK government will only intervene if a university is at risk of closure where “it believes intervention is possible and appropriate, and as a last resort”.
- In addition to this, the Scottish Government announced on 7th May 2020 there will be “a one-off £75 million increase in funding for Scotland’s universities”. This intervention is intended to help Scottish universities to secure jobs and research activities.
Response to Support Package
- It has been widely recognised by the higher education sector that that this support package is a step in the right direction.
- Universities UK welcomed the support package and the recognition by the government about the sector. They stated universities will likely want more details once the package has been reviewed and further support will be needed for the devolved governments.
- The Higher Education Policy Institute (HEPI) stated the government response “delivers much of what the higher education sector called for without over-exposing taxpayers.”
- Universities College Union (UCU), a representative body within the sector, still wants the government to underwrite income lost from any potential falls in domestic and international students.
- Some commentators in the sector are saying it’s not enough with more needed to protect universities and others say it doesn’t address the anticipated fall in income from international students, the extent of which is currently unknown.
Meaning and Potential Impact
- The support package appears to assume the next academic year will begin in September, or at least at some point in 2020. This suggests that students would require accommodation close to “normal” term time arrangements, however start dates for the majority of universities are still unknown.
- International students remain a significant risk to income. It is positive the government has recognised higher education to be one of the UK’s key exports stating the UK is still very much *open* to international students and identifying that recruitment of this cohort needs extra support.
- The student number cap could still place lower tier universities at risk with more prestigious universities potentially mopping up students in the coming academic year. This could mean PBSA assets in secondary locations, particularly those reliant on a single university, may be more exposed to occupancy and income risk when compared with assets in prime or super prime locations.
- There is still risk that some universities could enter serious financial distress. Some universities are reporting large losses and others are reportedly opening voluntary severance schemes. A focus on university financial performance, exposure to risk, domicile composition of the student population and student applications will be key metrics to understanding the impact of COVID-19 on operational PBSA assets and occupancy in the coming months.
- Similar to our previous blog’s ending, there still remains many unsolved questions about ultimately what Autumn 2020 will bring to the sector and PBSA. This is not just about how universities manage or how many students actually enrol, but also, for example, how any social distancing measures may have to be implemented on campus and in PBSA schemes. We will carry on exploring these fundamental questions as formal policy and decisions are announced.
Sources: Universities UK, Times Higher Education, UK Government, HEPI
Further details about the support package can be found on the UK Government website here.
Further details on the one-off funding to Scottish universities can be found here