Covid-19 and university finances – update 6

March 24th, 2021

Deputy Vice-Chancellor Professor Andy Long and Chief Financial Officer Margaret Monckton write about the latest developments on plans to address the financial impacts of Covid-19.

It is pleasing to be able to open this blog with the good news that 2020/21 incremental pay progression will be paid to all eligible staff, and colleagues paid at the Voluntary Living Wage rate will also receive its most recent increase.

As many will be aware, spending had been paused on pay increments and the Nottingham Reward Scheme in order to protect jobs while we navigated the financial uncertainties of the Covid-19 pandemic. We are pleased that we have been able to offer colleagues some financial recognition for the additional efforts and contribution you have made during this extraordinary year. This was only made possible through your patience, hard work and diligence in meeting our shared savings targets, against a very difficult financial backdrop caused by the global Covid-19 pandemic. Thank you.

Budget plan 2020/21

There is some further positive news to report in that our projected income losses due to the pandemic for this academic year of £150 million have reduced to £122 million. Again, this has only been made possible through the difficult decisions made by managers across our community in pausing investments and reducing costs in a sustainable way, alongside securing higher than expected levels of student recruitment.

Overall, this also means we have been able to make decisions that reduce the original 15% reductions which were part of our Covid financial strategy to nearer 11%, while maintaining our commitment to not make any compulsory redundancies, pay increments, and draw back on the requirement to rapidly improve research margin to further reduce pressure on faculties. We firmly believe that in continuing to follow this path, we can rebuild University income faster than many, and in a sustainable manner that supports the long-term interests of our staff, students and research.

An ‘alternative’ financial strategy

To be where we are financially at this point in the academic year is testament to a sound financial strategy, accurate budget planning and the support of our community. It was therefore disappointing to see that the University’s UCU Branch has produced an ‘alternative financial strategy’ that proposes the University takes on serious and significant amounts of additional debt to ride out the financial storms caused by the pandemic.

Suffice to say, we fundamentally disagree with the premise of the strategy and have noted some serious inaccuracies within it. For example, we do not manage our banking in a high risk or controversial way, we are not planning on delivering “£100 million annual surpluses,” we have not committed to a “£430 million five-year infrastructure programme,” and we have not once come close to breaching our liquidity requirements.

To follow the ‘alternative strategy,’ take on further debt and service large interest payments at this time would only result in reduced spend on teaching and research, staff, students and facilities. The inaccuracies are all the more disappointing because, despite many opportunities, at no point has the UCU Branch raised this document with us before circulating it. We have also been extremely transparent with all colleagues and the UCU Branch about our current financial strategy and managing the financial challenges of Covid-19, including regular and detailed presentations, blogs and more than 100 staff briefing sessions attended by some 3,500 colleagues to date.

Our detailed response

We have now met with representatives of the UCU Branch to discuss their ‘alternative strategy’ further, highlight the inaccuracies and provide our response to it. In the interests of further transparency, a copy of our detailed response is published here alongside an analysis that demonstrates that this is similar to the approach taken by other Russell Group universities.

However, our summary is as follows:

• our overarching priority is for sustainable financial management and investment for the future of our staff, students, teaching and research;

• counter to the ‘alternative strategy,’ the future of our University is not best served by increasing levels of debt, which would place additional burdens on future generations of students and staff;
• indeed, increasing debt only serves to increase annual interest payments which in turn would require greater not fewer financial efficiencies and restrict our ability to invest;
• as an institution, we are keen to invest in our future, but will do so within our means, rather than becoming reliant on increased financialisation and private lenders – trends that UCU itself has strongly objected to over the past decade;
• our day-to-day treasury model is based on cash management that reduces costs while maintaining liquidity, we have ample access to cash where required and believe that the UCU Branch has simply misunderstood this model.

Perhaps most importantly, the leading independent credit rating agency Standard & Poor’s performed an in-depth review of our financial arrangements last year and commented that “The University of Nottingham has improved its financial resources, putting it in a good place to weather Covid-19 related headwinds.”

It is worth adding that the University’s governing Council is highly supportive of our financial strategy. Council considers the key issues of University finances at each of its meetings, and the University’s Finance Committee examines in detail the University’s financial strategy and budget, progress against the Medium Term Financial Plan and the full range of financial performance indicators at all of its meetings.

Considering the financial challenges presented by Covid-19, we are surprised that UCU at Nottingham is arguing in favour of increased institutional indebtedness, when these are the very dynamics in parts of the sector that UCU has been campaigning against over the past decade.

We both remain very happy to discuss any element of the University’s financial strategy with colleagues and will continue to publish regular updates like this, alongside our staff briefing sessions, to ensure that colleagues understand the approach we are taking and how this will ensure we can build back stronger from the pandemic – in the interests of a long-term, sustainable financial future for all of us.

You can read more about the scale of the financial challenge and our community’s work to meet it in previous blogs in April, May, June, July and January.

Tags: coronavirus, COVID-19
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