Demonstrating the value of our university

20 Nov 2018

In the latest issue of our Magazine, President and Vice-Chancellor Professor Dame Nancy Rothwell and Director of Finance Stephen Dauncey set out some of the ways in which the University's finances work

We are committed to being recognised globally for the excellence of our research; outstanding teaching, learning and student experience; and our social, economic and cultural impact. These activities have associated costs but also generate far-reaching value.

The last year has seen an unprecedented level of public discussion about the funding of universities. Questions have been raised about whether universities provide value for money for undergraduate students in the face of growing concerns over student debt. There has also been criticism of the pay and rewards of some university leaders.

While these are legitimate and understandable concerns, the focus on these issues has tended to obscure an important wider debate about how universities are funded and their valuable role in discovering new knowledge, contributing to the health, wealth and welfare of our society, improving social mobility and developing well-rounded graduates with the personal and leadership skills they will need to make a meaningful contribution to society.

Like most British universities, ours has charitable status and is not a business. To give you an idea of our scale, our annual turnover is about £1 billion a year. Additionally, each year our activities generate more than £1 billion to the economy. We employ almost 12,500 people directly and many more indirectly.

Our funding comes from a wide variety of sources, including student fees, research and government grants, and much more modest income earned from activities like conferences and catering. This income is invested in many different ways.

As an organisation with charitable status which is supported by public funds, we have a responsibility to account for every pound we receive and demonstrate how that money is spent. We are also subject to rigorous internal and external audits. We take this responsibility extremely seriously and publish our Statement of Accounts annually on our website alongside the progress we are making towards achieving our goals in our Stocktake Report.

We do not exist to make a profit, but we do have to take care to ensure that we have adequate surpluses available to invest back into our University to maintain our long-term financial sustainability. We have a duty to ensure that our surplus meets the level recommended by our Board of Governors to assure them that we are financially sustainable.

Last year our operating surplus met our target of 6% of income, which was a challenge given that home/EU student-fee levels are capped while our costs continue to rise due to inflation and a weak sterling. This year we anticipate that our surplus will be much lower, which we must address if we are to maintain long-term financial sustainability in the face of some major challenges to the higher education sector.

As well as investing our surplus back into the University, each year over half of our income is spent on our most precious asset – our people – through pay, National Insurance and pension contributions. We also invest significantly in staff and student welfare, IT developments and the long-term maintenance of our 229 buildings spread across our 270-hectare campus.

This investment is vital because in a highly competitive global market we need to keep improving teaching and research capabilities, investing in our staff and our infrastructure if we are to achieve our ambitions.

An added challenge for research-intensive universities like ours is that not all of the costs associated with research are met by the grants we receive from research councils and charities, despite previous commitments by the government to move towards full economic costing. In essence we, like all comparable universities, lose significant amounts of money on our research as we recover only about 75% of our full costs.

For teaching, learning and the student experience, the funding we receive from home/EU student fees and the supplement provided by the government in a few subjects is equivalent to what we spend on providing teaching and learning. This includes investment in IT, teaching facilities, laboratories and equipment, and a range of student support services, for which government funding has been almost completely removed.

The University has actively pursued growth in international students, philanthropy and other areas for income diversification in order to deliver a sustainable position. These areas are all aligned to our three goals and help to deliver the operating surplus.

Universities are complex organisations with many interdependencies and cross-subsidies, where not every cost can be attributed to a specific activity. The reality is that it is not always easy to neatly separate expenditure on research and teaching. Most of our academic colleagues take part in both, which means that our students benefit from being taught by active researchers and have the chance to take part in research projects using high-quality research facilities.

As you will know if you’ve visited our campus recently, we are in the middle of an ambitious ten-year plan to create an inspiring and progressive environment that will benefit both staff and students, now and in the future. Many of our new buildings, like the Graphene Engineering Innovation Centre and the Henry Royce Institute, are completely funded by external sources. Others, like our Manchester Engineering Campus Development (MECD), are funded through a combination of external and internal funding.

The costs of delivering MECD are estimated to be half of the projected costs of remaining on North Campus for even another ten years. Moving to MECD will reduce our running costs and carbon footprint, as well as bringing all our students together onto one campus. The move will also free up considerable land holdings, enabling the University to play a significant role in the future economic success of the city by developing the North Campus site into a world-class innovation district over the next 20 years.

Of course, demonstrating the value of the University runs much more deeply than simply accounting for how we spend our income. Every day we add value to the lives of people locally, nationally and internationally who are touched by our research, teaching and learning, and social responsibility activities. It is through these that we know that we are, to quote our Chancellor, Lemn Sissay, truly “making a difference”.

• Published in The University of Manchester Magazine, Issue 10, Autumn 2018