No Compulsory Redundancies at The University Of Edinburgh!

Management Is Manufacturing a ‘Financial Crisis’ to Impose Staff Cuts

Financial mismanagement at the University of Edinburgh continues. On 11 February 2025, Peter Mathieson wrote to all staff threatening “restructuring, possible closures of programmes or even Schools, mergers or shared services between Schools, centralisation of some services, outsourcing of others: nothing is off the table.” The increasingly hostile communications have done nothing to improve transparency or communication with staff and students, and they continue to misrepresent the sources of financial strain and the pathways to resolution available to one of Britain’s wealthiest universities.

Despite repeated questions from staff, unions and governing bodies, it remains the case that management has not announced its targets—in terms of reducing staff numbers, savings from voluntary severance, or the like. But now, to the threat of “compulsory redundancies” has been added the possibility of centralised reorganisation. This is exactly the sort of “restructuring” that lines the pockets of consultants and interim contractors without improving teaching and research. And it is exactly the type of top-down reorganisation that the current management has shown itself woefully ill-equipped to manage (as everyone who remembers “Service Excellence,” “People & Money,”[i] and “Diversity Travel” knows).

This blog post provides further evidence from the newest Annual Report (for FY 2023-24) to demonstrate that:

1.      UoE income is increasing and staff costs are decreasing as a proportion of overall expenditures.

2.      The problem is with capital expenditures and other financial choices.

3.      UoE has sufficient resources to weather any financial strain.

4.      Management is manufacturing a crisis, including through misleading data, to justify reduction in staff.

5.      The prevailing financial mentality is mistaken.

6.      There are better pathways to budgetary resilience, including limiting capital costs.

This is the fourth in our series, and we encourage you to read Part 1, Part 2, and Part 3.

NB: All data in this blog is drawn from available published sources, aside from the graph presented by management in section 4. All notes in the text are available at the end of the post.

1/ Income is increasing, staff costs are going down as a proportion of overall expenditures

The first thing to learn from the 2023-24 annual report is that the University’s income continues to rise. In 2024, it stood at £1,434m, up £49m over the year and £136m compared to 2022. This increase reflected the solidity of the University’s core business, with all the University’s sources of income providing growth, except donations and endowment income. The growth in income was especially remarkable in the University’s teaching activities, given the current context. Enrollment was essentially the same as prior years: the fall of approximately 250 students reflects only a 0.5% decrease in student numbers. But because it was a more profitable mix of students, income from tuition fees actually grew by 2.6% between 2023 and 2024.[ii]

The University’s core profitability (as measured by EBITDA[iii]) remained positive and healthy at £84m in 2024. This means that for every week of the 2024 fiscal year, the University’s core activities generated £1.6m more in income than they cost in expenditures. This profitability was lower in 2023-24 than it had been in 2022-23, when it rose to £148m. But a year-over-year comparison is misleading: in the years immediately after COVID lockdowns, surplus boomed to unprecedented highs (£148m in 2023, £168m in 2022). It has now returned to around its long-term level (£100m in 2021, £77m in 2020, £68m in 2019, £60m in 2018).

This relative decline in EBITDA surplus was not linked to staff costs; they remain proportionate, even declining by some measures. While staff numbers have increased to a degree, this is in line with the growing numbers of students. In 2018, the Student:Staff ratio was 3.95. In 2023, it was 4.10. In 2024, it was 3.78.[iv] If we are committed to maintaining excellent student experience, there need to be staff to do the work.

Moreover, staff costs continued their decrease as a proportion of expenditures: they stood at just 53.7% of our expenditures (excluding USS exceptional changes), a decrease from 55.1% in 2023, 56.0% in 2022, and 58.8% in 2021.[v]

Why have staff costs decreased as a proportion of expenditure? A large part of this decrease is the savings in USS pension contributions (for which UCU fought with little support from management). Contrary to what Peter Mathieson argued in the email of 18 November 2024, the increase in the National Insurance rate will have only a modest impact on expenditures on FY 2025, with the Annual Report estimating it at no more than £12.5m per year, a very minor part of our £756m staff expenditures and £1,409m overall expenditures.[vi]

[vii]

2/ The problem is capital expenditure

The most concerning part of the Annual Report relates to the University’s unrestrained capital expenditures. These need to be brought under control quickly. These expenditures grew at an unprecedented rate, reflecting the Senior Management’s lack of control over costs of the real estate projects they launched in the past few years. It reached the unsustainable level of £186m in 2024, up £19m compared to 2023, when it stood at £165m, and £28m compared to 2022, when it stood at £158m. This is 20% more than two years ago!

Most of this expenditure was dedicated to the University’s real estate, with £120m spent on land and buildings, and £63m on fixtures, fittings, and equipment. This high level of capital expenditure is unsustainable in the long run: our University cannot continue to spend more than £150m annually on capital projects, including £120m on buying new real estate properties every year, when its core business generates less than £84m per year. These enormous expenditures are not required by extra student intake, as our student numbers are stable, and in-person student numbers have been decreasing due to the rise in online learning.

And yet, as we discussed in our 13 December post, the University Court continues  to approve management plans for large property purchases. Most recently, in their October 2024 meeting they “gave approval to progress [a] proposed acquisition process” for a major new estates project.[viii]

At a time when the Senior Management Team argues we are going through a financial crisis, why hasn’t it adjusted capital expenditures? When will they finally derisk our business and adjust capital expenditures to our long-term surplus prospects?

3/ There are sufficient resources to weather the current situation

 The University has never been as wealthy as it is today, meaning it can weather a difficult period with no need for compulsory redundancies. The University has more than £3 billion in net assets.[ix] This means that its (very large) assets exceed its (much smaller) debts by £3bn. In the last year alone, the university saw a £352.4m gain in net assets from the elimination of debts owed to the USS pension scheme. Since UCU always believed the USS deficits were artificial, we should not treat their elimination as a genuine improvement in University finances. However, it remains the case that the net asset position of the University increased by £997m between 2019 and today. This is a real increase in wealth driven in large measure by the high EBITDA surplus each year.[x]

To be sure, not all assets are usable funds: selling buildings is not always wise and endowment wealth has restrictions on how it may be used. But the University does have considerable funding it can use to weather a tight period.

In recent years, the University has accumulated £436m in “other” investments (Annual Report, page 78). Around £259m of this is new in FY2023-24, as the management hoarded cash within, mostly, money market funds where they earn interest but cannot be used for operations. This is distinct from fixed assets such as buildings and also from the University’s endowment. These “other” investments and a small amount of “unlisted investments” (page 78) are plotted below as non-endowed investments. These large pots of money could temporarily cover deficits while staff numbers reduced through attrition without requiring the University to impose compulsory redundancies. Rather than simply growing our financial assets, we should make our assets work for the educational mission of the University.

4/ SMT is manufacturing a crisis to justify cuts

The Senior Management Team are manufacturing a crisis to justify cuts. Consider the following. At the all-staff town hall on 10 December 2024, the Interim Director of Finance presented the following graph, showing a dire forecast for “total cash days remaining” over the next 6 years. “Cash days remaining” was explained as the number of days that the University could sustain its expenses without any income.

To be sure, having a sense of liquidity is useful: if the world screeched to a halt, how long could we hold on?[xi] But the way the interim Director of Finance presented the data is purely speculative, and its underlying assumptions have not been proven, or even shared. Even more worrying: the indicators provided by senior management are grossly inconsistent with each other. The graph displayed in the all-staff meeting is not consistent with the Annual Report subsequently published by the University (for which they are legally obliged to be accurate). It fits a trend of misleading financial presentations from management (as we discuss in our prior posts). Let us explain:

 Graph content warning: sources of data unclear

The town hall chart asserts that the total cash days remaining in 2023-24 was 296 and next year it will only be 170, making it seem like we are going over a precipitous cliff edge. Yet, this town hall graph is not consistent with the Annual Report for 2023-24 (which includes audited figures unlike the town hall rhetoric). If we rely on the Annual Report, the reality is that the number of days of expenditure that could be sustained from available cash in 2023-24 was only 143 days—not 296. This is a “cash days” figure of less than half of what the management graph at the town hall would have you believe.[xii]

One of the reasons for the discrepancy is that the audited figures only count what is called “current investments” (essentially short-term ones). Yet, the decisions of management have led to huge amounts of University money being tied up into “non-current investments” (which are not easily converted into cash). By our calculations, if the University had not moved nearly £260m into non-current investments, we would have actually improved our liquidity position in the most recent financial year—241 cash days, an increase compared to 2022-23.[xiii]

Beyond the immediate problems with the Interim Director of Finance’s figures being incorrect for 2023-24, the key takeaway is that the University can decrease cash days at will by investing in non-current assets (rather than staff, for instance). Likewise, it can improve its liquidity position by converting non-current investments into cash equivalents. Justifying a crisis by presenting a decrease in “forecast cash days” is intentionally misleading and disingenuous. The “cash days remaining” indicator therefore depends on the financial discretion of those in charge of managing the University’s finances.

We have shown in the previous section how the senior management has deliberately turned our liquid assets (including cash) into illiquid assets through unreasonable and excessive levels of capital expenditures. Likewise, the decrease in our projected “cash days remaining” reflects discretionary movement of usable funds into less liquid forms. 

Finally, it is worthwhile to look back at the historical cash days over the previous years, available in the financial archives. The current 2023-24 “cash days remaining” situation does not appear to be a significant outlier, particularly compared to pre-Covid levels. This indicates that our alleged liquidity crisis is manufactured by senior managers to justify cuts to staff.

 5/ The prevailing financial mentality is mistaken

It is important to understand the mentality driving the invented crisis: it is not merely that Senior Management like the photo opportunities and architectural awards for projects like the Edinburgh Futures Institute (though it seems they do). It is that from the perspective of the Finance team, a growing “balance sheet” is a good thing. Buying buildings and other illiquid assets boosts the balance sheet—from £2,054 million in assets in 2019 to £3,051 million in assets in 2024. From their perspective, this is a success, the sort of thing on which they get promoted.

In contrast, they see staff as a burden. Indeed, the very language reveals it: buildings are “assets” while staff are “costs.” The trouble is, the buildings and financial investments are meaningless if students are not learning and research is stagnating.

It would be one thing if the prevailing financial mentality were steering the ship well. However, anyone reading the tea leaves – including with changes in the Finance leadership, or in the misrepresentations from Senior Management Team – can see that there have been significant managerial errors. For instance, despite University Court insisting in recent years that EBITDA is the guiding light for financial decisions, management is now acknowledging it is a misleading indicator. In recent months, the interim Director of Finance has emphasized that it is not a “break even” measure. While this may be the case, it amounts to an about-face for the Senior Management Team which has placed so much weight on an accounting metric which is unfit for higher education (as we discussed previously).

6/ Compulsory redundancies are not needed: senior management must explore other options!

Following the publication of the latest annual report, we strongly disagree with the Senior Management Team on the need to cut staff costs:

• Our income is robust: our tuition fee income is rising.

• Our staff costs are under control: they are decreasing as a proportion of overall expenditures.

• Our profitability is positive and healthy, with the University’s core activities generating £84m more in income than they are costing in expenditures every year, or £1.6m in surplus every week.[xiv] This profitability level is down compared to 2021-22 and 2022-23 levels, but still higher than long-term levels in the 2010s.

• The University has never been as wealthy as it is. It holds considerable assets and these assets are growing quickly, up by £600m on 2018 levels, meaning that the University has a lot of headroom to weather potential shocks to our business.

• Our University has plenty of liquid assets. The decrease in the liquidity position is the result of discretionary managerial choices, as they actively turn our liquid assets) into illiquid ones (e.g. speculative real estate projects) through unsustainable level of capital expenditures. We are concerned that the Senior Management Team is manufacturing a liquidity crisis to justify cuts.

• The main risk to our finances lies in the rising, uncontrolled, and unsustainable level of capital expenditures. At £186m in 2024, these capital expenditures are more than twice our profitability level. Two thirds of these capital expenditures are investments in acquiring land and buildings. Capital expenditures need to be brought back under control right now. At a time when student intake is stable, their current level makes no sense and is the main risk to our University.

 UoE Joint Unions Finance Working Group

Endnotes

[i] The External Report to the University Court on the fiasco of the roll out of this system, and the harm it caused, is worth reading. https://www.ed.ac.uk/news/staff/2023/external-review-of-people-and-money.

[ii] Annual Report 2024, p. 69.

[iii] EBITDA is Earnings Before Income, Tax, Depreciation, and Amortization (EBITDA).

[iv] Such a ratio is not a precise science. We have adopted the most conservative approach, which uses the “consolidated number” of full time equivalent staff reported in the annual reports. This includes non-academic/teaching roles (such as premises, residences, and catering).

[v] Based on our own calculations using annual reports. We excluded USS exceptional changes to both staff costs and expenditures to be able to compare fiscal years with each other. This coincides with the data available on the Annual Report 2023-24 p.42.

[vi] Annual Report 2023-24, p. 38.

[vii] Note that the range of the y-axis is truncated to 51-60% for better visibility of the year-on-year variations. The same graph with the full y-axis 0-100% would look almost flat (because again, contrary to management claims, staff costs as a % of expenditure have very much not been ballooning).

[viii] October 2024 Minutes of the University Court, p.9, available at https://www.docs.sasg.ed.ac.uk/GaSP/Governance/Court/2024-2025/20241007-Court-Minute-Web.pdf

[ix] See Annual Report 2024, p. 104.

[x] Although management initially projected that COVID would lead to severe financial problems for the University, the reality was that there were larger surpluses than in any previous year and then larger surpluses again, totalling hundreds of millions of pounds. 

[xi] Though, of course, the fact that most of a University’s income is routinised and even guaranteed over the next 3+ years of tuition payments means that – unlike a commercial business – it does not face the same sorts of likely interruptions to income.

[xii] The formula given in the document to calculate cash days is (investments + cash at bank – overdraft) / (total expenditure – depreciation) * 365; reproducing this calculation also gave us 143 cash days. We could not find any explanation or alternative interpretation of “cash days” which would result in a figure anywhere near 296.

[xiii] A bit more on our calculations, because we think that sort of transparency matters. We found a drop of £215.6m in “cash and cash equivalents”, as well as a drop of £217.2m in “current investments”, and a corresponding increase of £291.4m in “non-current investments” between 22-23 and 23-24. This represents a large net movement of money from cash to non-current investments. Looking at the investments breakdown on page 79, for example, we see a total of £259.6m invested across 7 non-current treasury investments which the University did not hold in 22-23 (2023 financial report, p.88).

[xiv] As measured with EBITDA, earnings before interests, taxes, depreciation, and amortisation, the indicator chosen by the University Court to reflect the profitability status of the University.