Author: Robert Kerse

We have published our Annual Report and Financial Statements for the year ended 31 July 2022. You can find the full report on our webpages.

Besides being able to welcome our students and staff back onto our campuses after the government’s lifting of COVID-19 restrictions and our outstanding performance in the Research Excellence Framework (REF 2021), there was much to celebrate in 2021/22. The Annual Report highlights some of the many brilliant achievements by colleagues, students and alumni over the last year, from research accomplishments and teaching awards to exceptional work in our local communities and in the international arena. Do take a look – it makes for a rewarding read and serves as a reminder of the fantastic work being done by our academics, Professional Services staff, students and graduates, day in and day out.

It’s only right that we also acknowledge the many challenges that we continue to face, both individually and institutionally. With that in mind, I wanted to present an update on the picture that our Annual Report and Financial Statements provide.

Our financial position

Our audited financial statements for the year ended 31 July 2022 report a deficit before other gains and losses (revaluation of our property and changes to the funding level of the UBPAS pension scheme) of £135.8 million compared to a prior-year surplus of £66.1 million. The deficit in 2022 was impacted by a significant one-off pension cost of £191.1 million following the agreement of the 2020 USS valuation. This significant charge reflects our best estimate of the cost of paying the USS past service deficit contributions that the University is contracted to make over the next 16 years at today’s prices.

USS has reported a significant improvement in the funding position of the scheme during 2022. There may be a reversal of this charge following the next valuation of USS on 31 March 2023 if the improvement in market conditions for defined benefit pension schemes persists over the coming month. We remain contracted to pay very significant past service deficit contributions to USS until a new valuation is completed. Adjusting for this one-off event would turn the reported deficit into a surplus before other gains and losses of £55.3 million, which would be more comparable with the prior year surplus of £66.1 million.

Our surpluses are used to maintain and replace our existing physical and digital infrastructure, including our student residences. We typically spend around £25 million each year maintaining what we have. Remaining cash is allocated to significant investments to replace or expand our education and research facilities. We are currently investing £35 million of our surpluses in a new clinical training facility for our dental students at Temple Quay. This will open in 2023 and will provide a much better learning environment for our students, provide free primary dental care to the local community and help to increase the number of dentists. We are also making investments in our North Somerset Campus at Langford to support a growth in veterinary students. There is a national shortage of both following Brexit, and we want to play our part in supporting the future of our communities.

Our investments have not only been in people (460 new jobs) and our campus facilities. We are also investing in our digital infrastructure. Last year we invested over £10 million in the delivery of our Digital Strategy. The early phases are focussing on ensuring that we have a resilient infrastructure that will enable colleagues and students to access our digital services in a secure manner from anywhere in the world. We are also providing new functionality to support our education and research. For example, we have recently launched the Self-Service Cloud, which enables members of our community to seamlessly access various cloud environments and reduce the need for local physical servers and networks on campus. We’ll shortly be embarking on a replacement of our entire campus IT network, both cabled and wireless, to substantially improve the digital experience.

Income and expenditure during 2022/23

Income grew by 10% in the year to £858.1 million (2021: £776.7 million) following growth across all key income streams. Student tuition fees grew 11% to £388.4 million (2021: £349.8 million) with income from international students showing the largest increase of 21%, reflecting continued high demand from overseas and our strategy to further internationalise our student body. Fee income from home students demonstrated a more modest increase of 4%.

Research grant and contract income grew by 9% to £192.8 million (2021: £176.4 million) with income from Research Councils growing by 12% and more than offsetting a 10% reduction in research income from UK-based charities who are taking longer to recover from the after-effects of the pandemic. It was very pleasing that we continued to grow research income, which is a good proxy for the amount of research we are undertaking, in line with our growth in student tuition fees.

Other income of £148.9 million showed growth of 18% (2021: £126.3 million) driven by a 58% increase in revenue from residences, catering and conferences. This reflected pre-pandemic levels of income with the 2021 comparative year having been significantly impacted by national lockdowns and by the decision to provide rent rebates to students adversely affected. Donations of £4.9 million recognised in the accounts (2021: £17.9 million) were significantly down but the prior year figures included a one-off, £7-million gift of scientific equipment and the £7-million recognition of donated heritage assets. It should be noted that total income from philanthropic sources last year was £29m – a record for the University. This support was recognised across multiple income streams including our research grants and contracts income and our endowment donations.

Staff costs, excluding one-off USS pensions costs, grew by 8%, which is broadly in line with our growth in tuition fees and research income. This increase is largely accounted for by the 460 new academic and Professional Services jobs created. These new jobs have helped us to address some workload challenges and provided opportunities for local people, as well as attracting further talent from overseas.

Other operating expenses were back to their pre-pandemic levels at £287.5 million, an increase of 24% on the prior year (2021: £231.9 million) where, owing to the impact of the pandemic, expenditure had been prioritised primarily on staff and students and essential operation of the estate.

Now and looking to the future

Financial margins for the new academic and financial year that we are now in, and for the next few years to come, are a lot tighter than they’ve been in recent history. We aim to keep our core education and research activities in a ‘break even’ position, excluding grant monies we receive for capital assets, any investment gains and losses on the Bristol Endowment Funds, and any valuation changes for both the properties we use and staff pension schemes. This is a tough challenge given the lack of any prospect of our largest income stream – home undergraduate tuition fees – being raised in the foreseeable future, alongside significant cost inflation. We are acutely aware of the impact of inflation on our students and staff. Our key objectives are to support the whole University community through these challenging times, to preserve jobs, and to make sure that we take opportunities and make investment decisions that will help ensure the medium-to-long-term success of our institution.

It is likely that we will continue to grow our academic endeavour over the coming years as we build on the success of the excellent REF 2021 results and many people from both home and overseas want to come and study and our institution. Further growth is not without its challenges, and it needs to be the right growth that helps us to achieve our academic potential. However, growth represents a considerably lower set of risks and issues than standing still or shrinking. It will not be possible to retain our existing broad academic endeavour and protect jobs in the current economic and fiscal environment without the right growth, managed well.

The Temple Quarter Enterprise Campus is at the heart of the next phase of our growth and development strategy. It will facilitate an expansion in our research, enterprise and education activities in exciting areas that are important to the future prosperity of our city region. The new campus will also facilitate around 3,000 new purpose-built student beds over the next four years.

We have a choice as to whether we want to be a good regional university, or one of the best in the world. It is essential that our community fosters a strong sense of ambition and entrepreneurial spirit for our University, and for our city, in order that our institution prospers for the next century and achieves even greater things. Given the passion, ingenuity and collegiality I see on a daily basis, I am sure that it will.

 

We recently published our Annual Report and Financial Statements for 2020/21.

As always, this report goes much further than simply fulfilling the reporting requirements of the Office for Students, the Charity Commission and other bodies – it showcases the exceptional achievements of colleagues and students over the last academic year. These achievements are all the more impressive in light of the uniquely challenging circumstances that prevailed throughout 2020/21.

2020/21 highlights

Colleagues across our community worked tirelessly to implement large-scale measures and initiatives to help keep us all safe. We continued to deliver on our pledge to provide an education and student experience that enables all our students to thrive and achieve their full potential. While the pandemic necessitated an unprecedented emphasis on our digital education provision, we nevertheless maintained a focus on curriculum enhancement and continued our work to increase opportunities for students to develop valuable skills and experience.

Our community’s contribution to COVID-19 research has been outstanding, not just in biomedical disciplines but also in social sciences and the arts. We are equally proud of the research that our colleagues have conducted outside of the COVID sphere. This activity made a slow but sure recovery during the year, as further lockdowns and restrictions began to ease, and more colleagues were able to return to the facilities and interactions needed to resume their research.

Throughout the year, we forged significant new strategic international partnerships, consolidated our role as a key player in the South West economy, secured new funding for postgraduate research training, and continued to support innovation and entrepreneurship. Seven new University spinout companies were incorporated and, between them, our 81 active spinouts raised more than £628 million.

Elsewhere, we made continued progress on our gender and ethnicity pay gaps; work has begun on a four-year programme to modernise our critical IT infrastructure; we’ve made great progress in meeting net zero carbon target; and the refurbishment of Senate House is transforming the student experience, giving our students a new home of their own at the heart of our campus.

The Annual Report is full of more of your achievements – I encourage everyone to take a look!

2020/21 financial performance

The Report also sets out our financial performance for the last academic and financial year and provides a snapshot of our financial position on 31 July 2021. Overall, this position remains healthy and we achieved a surplus before other gains and losses of £66.1 million.

Every year, our operating income needs to be greater than our operating expenses so we can reinvest in the University’s long-term academic needs and research endeavour. The surplus generated in 2020/21 will help pay for important investments in new academic and Professional Services roles, the Digital Strategy, facility improvements and other key projects, such as a new community dental facility that will transform our dental education.

Several one-off developments contributed to the surplus, and these have been included in the table above. These include recognition of heritage assets gifted to the University of £7.4 million.

Income

Income from tuition fees and funding council grants increased notably since the original budget. We saw an 8% growth in total student population. As a result, tuition fee income totalled £349.8 million (£8 million higher than originally budgeted and an increase on our 2019/20 figure of £315.5 million). We are hugely appreciative of the efforts colleagues have made, and continue to make, in order to accommodate higher than planned undergraduate entrants. This follows two unprecedented recruitment cycles and the use of Teacher Assessed Grades by schools and colleges.

‘Research income’ was also higher than expected at £176.4 million, despite the reduction in UKRI Official Development Assistance (ODA) grants, and partly reflects the strength of new grant applications being made.

The University’s ‘Other income’ stream was most adversely impacted over the year, totalling £110.6 million (£19 million less than originally budgeted). This is principally due to the rent rebates and early tenancy releases we offered to students in university allocated halls, and our overall COVID-related support to students was among the most generous in the sector. Sports and catering income also came under pressure due to restrictions and lower footfall on campus.

Expenditure

The University’s staff costs and other operating expenditure for the year was £638.2 million – £12 million more than originally budgeted. We incurred significant additional costs in order to manage effectively the impact of COVID-19 on our learning and research. This includes COVID-related student support noted above, costs associated with delivery of blended learning, supporting early-career researchers, personal protective equipment and investment in our academic community, Professional Services and facilities, with additional posts approved to provide extra resource.

Of the £52.5-million contingency budget, £46 million related to significant uncertainty that existed over student numbers (particularly overseas students) and potential withdrawals. As noted above, this was not subsequently required as tuition fee income was higher than budgeted. The remaining contingency was released to offset the lower levels of residential income generated during the year owing to the exceptional rent rebates and early tenancy releases we gave to students in University-allocated accommodation.

Looking ahead

The future remains difficult to envision with any certainty. We are confident that prudent planning and the committed efforts of our colleagues will ensure that 2021/22 continues to show excellent results in our core activities of teaching and research.

The finalisation of the 2020 USS valuation in September will a significant impact on any surplus for 2021/22.  This is expected to worsen the surplus forecast by £200 million and take us into a deficit. However, this is an accounting adjustment to reflect the fact that more payments will be required in the future, rather than increased payments this financial year.

Excluding this adjustment, the surplus before capital grants is forecast to be £5.3 million this financial year. This has been supported by strong tuition fee income (through increased student numbers) which is forecast to be £10.9 million above budget. Increased pay and non-pay costs have been allocated to support the extra student numbers.

Your efforts, both as individuals and as a community, have helped us navigate another difficult year and emerge in good shape. There remains a great deal of ambiguity ahead. Our external environment continues to evolve, the policy landscape remains potentially volatile, and we still don’t know how the pandemic will ultimately unfold. There remains £17.5 million included within the current forecast for contingency, with ongoing uncertainty over the potential impact of any future COVID restrictions.

With work ongoing to review and revise our institutional Vision and Strategy, the input of colleagues across the University will help ensure we’re able to move forward together positively and achieve even more success over the coming decade.

If you have any questions on this update, or on any other matter, do please contact me at coo@bristol.ac.uk.

 

We are fast approaching our financial year-end on 31 July and working to close our accounts from 2020/21. Ahead of this, our budget for the 2021/22 academic year was recently approved by the Board of Trustees. This provides the resources needed to power our education and research over the coming year, support us to achieve our wider ambitions, and safeguard the University’s long-term academic mission and financial sustainability.

Budget: 2021/22
Our institutional response to Covid remains a prominent theme underpinning next year’s budget, with the potential of future waves still posing significant risk to both our income and expenditure. The impact is both direct (reduced income and increased costs) and indirect (significant pressure of public spending leading to funding cuts).

Our experience in 2020/21 is that c40% of combined budgeted income from supporting services (student accommodation, sports, catering and events) may not be achieved.  There are also some downside risks to some areas of student recruitment. Based on our operating experience and the continued expectation of income shortfall as a consequence of COVID-19, a contingency budget of £34m has been included to manage the ongoing pandemic.

Moving forward, we need to continue to balance effective financial stewardship of our University in the near term, with building capacity to fulfil our academic mission in the medium to long-term. This requires investment in our academic community, Professional Services and facilities. To support this, the budget provides for an additional 154 core funded academic roles and 73 Professional Services roles for 2021/22, compared to our current year resourcing levels.

The collective efforts of the whole University community has had a huge impact on how we are able to move forward positively into our next academic and financial year.

Looking back at our 2020/21 budget
The table below summarises the main movements in our forecast for this year compared to the budget we set ourselves. Overall, our financial position remains healthy.  We are forecasting a surplus before Capital Grants of £26.7m for this financial year. This surplus will help pay for our investment in new roles, the IT Digital Strategy, facility improvements and other projects such as a new community dental facility that will transform our dental education.

Income
Our forecast income from tuition fees and funding council grants has increased notably since our original budget. We have seen an 8% growth in total student population and withdrawals have not been significantly higher than previous years; as a result, this income is currently forecast to be £414.1m (£14.6m higher than originally budgeted).  We appreciate the substantial efforts that colleagues made to accommodate higher than planned undergraduate entrants than we had planned.  It was important to us to give young people the choice as to whether they wanted to commence study this year or defer due to the limited other options available to them.

‘Research indirect income’ is also higher at £46.7m, despite the recently announced reduction in UKRI Official Development Assistance (“ODA”) grants.  This reflects both the strength of new grant applications being made and some work that we could not undertake last year due to lockdown restrictions being deferred into the current year.

The University’s ‘other indirect income’ stream has been most adversely impacted over the last year, which is now forecast to total £112.9m (over £20m less than originally budgeted). This is principally due to the rent rebates and early tenancy releases that we have offered to students in University allocated halls.  We have considered it fair to offer substantial financial support to those in halls, which is amongst the most generous in the sector.  Students who have not wished to return to campus since early January have not had to pay any rent.

Sports and catering income has also come under pressure this year due to restrictions and lower footfall on campus.

Expenditure
The University expenditure is forecast to be £493.1m – £19m more than originally budgeted. There have been significant additional costs during 2021/22 to effectively manage the impact of COVID-19 on our learning and research. This spend relates to the support we have offered our students in halls, delivery of blended learning, personal protective equipment and additional resource to support cleaning and security activities. As we get closer to the end of the financial year, all areas have been assessing remaining budgets and likely timing of spend and revising forecasts accordingly.

As we have progressed through the year, our contingency budget has significantly reduced with £1m remaining. This reflects the level of residual risk we see for the current year and primarily relates to the recovery of student debt, which is running at higher levels than in previous years.

Planning for the future
This past year has not been without considerable challenges for our whole sector, but by taking early action and pausing non-essential spend and other commitments, we have so far been able to manage the uncertainty of the pandemic well and continue to be in good shape to invest in people and our strategic plans.

We are now reviewing our Vision and Strategy, ensuring we account for the dramatic changes in the external environment seen in recent years, and are well placed to build on progress since 2016. I encourage you to get involved in the review by joining the remaining live streams and sharing your thoughts and ideas via the strategy consultation form.

If you have any questions, please don’t hesitate to contact me at coo@bristol.ac.uk

 

 

Welcome to this first quarterly University finance update to help you understand our financial performance, how we are doing against our budget and what that means for our financial health.

Financial overview

Over the last year, the University has implemented significant institutional change to the way we deliver on our education and research mission. This has included limiting spending to protect jobs and ensure the University remains on a sound financial footing at a time of great uncertainty. While this approach has been difficult, it has helped the University weather the storm better than many other institutions in our sector. It has also enabled us to do the right thing by our students, including providing an overall package of support for those in halls which totals over £8.3 million to the end of March 2021.

While I hope we’re now past the most significant period of disruption, it’s important that we keep an eye to the future and the possibility of further risks and uncertainties ahead. This means we must continue to be careful in how we make use of the University’s money and resources; plan for a range of scenarios; make a judgement as to the most likely course of events based on the best evidence available; and be flexible and willing to change course should that be required. This will help the University minimise risk, enable us to continue to honour existing commitments and maintain investment capacity to employ more people, enter into partnerships and make other investments that will accelerate our academic mission post-Covid.

How we are doing against our budget

There have been significant movements in the University income and expenditure compared to the original budget, which was signed off by the Board of Trustees in June 2020. A revised budget was finalised in November 2020, once the University had greater clarity over the impact of the pandemic. The forecast is the latest full year prediction as at the end of February 2021:

Income

Our income from tuition fees and funding council grants is forecast to be £15.1m higher than originally budgeted. Student numbers are 4% higher than anticipated, largely in Home Undergraduates where there has been a strong student intake. There have also been additional grants received from Funding Councils (Office for Students and Research England) to support Universities during the pandemic.

The University is also forecasting to exceed budget for Research indirect income, as we have managed to continue with the majority of our research activities during the recent lockdowns.

However, there is forecast to be a significant reduction in accommodation income of over £18m compared to the original budget due to rent rebates and lower occupancy levels during the pandemic. There have also been impacts on catering income (£3m) and sports income (£1m).

Expenditure

Although income levels are slightly reduced overall compared to the original budget, the University is forecasting to spend over £20m more on non-pay and pay costs to support essential activities. Across Faculties and Professional Services, additional posts have been approved since the budget was finalised to provide extra resources to support blended learning, as well as additional cleaning and security staff.

Also, in non-pay costs there has been additional spend to enable blended learning, providing safe transport to and from NHS settings, additional PPE and microscopes. Professional Services non-pay also includes forecast overspend in Education and Student Experience in response to COVID-19, additional cyber security costs, and overspend in Office for Fair Access due to increased undergraduate home students.

The original budget included £52.5m of contingency due to the high levels of uncertainty as to how the pandemic would impact this financial year. As we progress through the year and greater clarity is obtained, this has been reduced.  £5.5m remains in the forecast at the end of February as there is still uncertainty over the final impact of the pandemic. The recent government’s announcement on the roadmap and its impact on the finances will be factored into the forecasts in future months.

Surplus

Every year, our operating income needs to be greater than our operating expenses for that year. This enables us to generate cash to reinvest in the University’s long-term academic needs and research endeavour – including our infrastructure, equipment and IT – and to ensure we have sufficient facilities for the future. Based on changes we have seen and budgeted for, this leaves us with a deficit before Capital Grants of £-6.7m.

Now, more than ever, the University needs to be prepared for an uncertain future, given the lack of clarity on the full impact of COVID-19, future government policies and also potential changes to the Universities Superannuation Scheme (USS) pension scheme that is currently undergoing a new valuation that could increase the costs for all Universities going forward.

University income and expenditure analysis – year ending July 2021

Pensions update

As recently shared with colleagues, the latest USS valuation report sets out the USS Trustee’s assessment of the financial position of the scheme and suggests various pricing scenarios to maintain the existing benefit structure going forward. If ratified over the coming months, these new pricing scenarios could significantly impact member and employer contribution rates.  Some form of change to future pension benefits earned may also be required in response to significant cost increases, but we are working hard to ensure that any changes are as minimal as possible; ideally from our perspective there would be none. Based on the assumptions and methodology used by the USS Trustee in its Report, we will be challenging the size of the scheme deficit and the pricing suggestions both directly with the USS Trustees and through UUK on your behalf. Our Vice-Chancellor recently sent a letter expressing our disappointment at the approach adopted by USS, including their limited adoption of the Joint Expert Panel’s recommendations, to the USS Trustees.

The University will continue to be a vocal and active voice in the ongoing dialogue between the USS Trustee, Universities UK (UUK) and the group of 340 scheme employers about the current and future financial health of the USS scheme and its cost.  We will continue to work hard to lobby to protect the benefit structure and the financial stability of USS, knowing that it is fundamentally important for you to be able to plan financially for your future.

Following the Easter holidays, you will be invited to take part in a consultation on the USS Trustee’s Section 76.1 valuation report and the potential implications for members. We would urge as many of you as possible to input to our University’s response to UUK (who represent the 340 USS employers) and USS. You can read more on our pensions webpage.

In summary

The lead indicators for our institution such as research grant awards and student applications continue to look promising for the future. While we continue to navigate the risks and uncertainties associated with the pandemic, we need to proceed with care over the next few months. Protecting jobs will continue to be a key objective. As the government implements its recovery roadmap and normality (hopefully) begins to return, the University will be in a good place to continue investing in our academic endeavour, our Professional Services, and the future facilities we need to realise our institutional mission.

If you have any questions on the content of this update, or on any other matter, do please contact me at coo@bristol.ac.uk.

This week we’ve published our Annual Report and Financial Statements for 2019/20. It showcases just some of the outstanding work that colleagues and students have undertaken over the last year in very challenging circumstances. The contributions of our community in helping society respond to the COVID-19 pandemic at both local and global levels are truly impressive. It also sets out our financial performance for the last academic and financial year and provides a snapshot of our financial position as it was on 31 July 2020.

Research

Our research activity was the key area impacted by the first national lockdown, between March and July 2020. Many colleagues were unable to access facilities and undertake the interactions that were needed to progress their projects. Activity was 7% lower than the previous year: a change from the sustained year-on-year growth in research activity in recent years.

This temporary setback was necessary at the time to manage the risk that COVID-19 posed across the wider community. We have subsequently learnt more about COVID-19 as a society. Government policy, based on this evolving understanding of the virus, reflects the view that the risk to ongoing research activity is now lower than previously anticipated.

Education and longer-term uncertainties

Despite the difficulties we’ve faced, learning activity has remained extremely resilient. This is not completely unexpected, for two reasons.

Firstly, the initial national lockdown occurred at a point where students were invested in completing the academic year, with a relatively low proportion of tuition still to take place across most of our programmes. Our student withdrawal rate in Term 3 of academic year 2019/20 was lower than in recent years, despite the lockdown.

Secondly, opportunities for school leavers and graduates to obtain work or travel are reduced at present. Universities are typically counter-cyclical to the general economy, and we are seeing greater demand from prospective students. That demand is often accompanied by increased investment from government to build the research, innovation and infrastructure economies needed to help sustain the country in the short term and position it well for the medium term.

Our student population grew by 7% during 2019/20. We expect similar levels of growth over the course of the current 2020/21 academic year, although it is still too soon to make accurate forecasts – we are still building our evidence base to understand how students are responding to blended learning, and some 4,500 students elected to start the academic year online. However, around 2,000 students have told us they are intending to travel to Bristol for the first time for Teaching Block 2.

We are left, then, with several important questions. Primarily, will student withdrawal rates be greater, less or about the same as usual? And what will the impact of vaccinations be? In response to these uncertainties, we need to continue to proceed with caution until the risks of student withdrawal are better understood, with the picture expected to become clearer in the new year.

What we do know is that demand for our other services, including residential accommodation, sport and catering, is down. This is the principal reason for a £23-million decline in ‘Other Income’ year-on-year between 2018/19 and 2019/20. We expect the decline to be sustained throughout most of the present year.

Residential income losses are expected to reach at least £25 million from the onset of the pandemic to the end of this academic year. This sum could be considerably greater if a higher proportion of learning activity were to move online. We therefore need to maintain adequate financial headroom to manage all of these uncertainties without adversely impacting our staff and academic endeavour.

Jobs and recruitment

Protecting jobs has been, and will continue to be, a key objective. We furloughed close to 900 colleagues over the summer period. Virtually all have now returned to work given the very significant institutional workload. Our temporary worker bank is also being fully utilised. However, we will continue to furlough permanent, fixed-term and temporary staff to protect their incomes as best we can, where it is not possible for their work to continue as a direct consequence of COVID-19.

Our investment in people has been significant. Our colleague base grew by 396 (6%) full-time equivalents over 2019/20. Investment in existing and new staff (excluding non-cash pension accounting) increased by £30 million. We have not stopped recruiting at any point. However, we’ve had to be really careful to make sure that we have only been recruiting the roles we require at the present time. This has helped us maintain the necessary financial headroom to manage the ongoing pandemic and reduce the risk of future job losses.

In prioritising recruitment and job protection, against the backdrop of falling residential, sport and catering income, we have been obliged to pause several planned capital projects. Our staff and students are the University’s top priority and our cash position remains healthy. This is critical to our collective future.

The 2019/20 surplus

So why, despite reporting a surplus for 2019/20 of £81.8 million, have we still been very careful with our resources? The answer lies in the accounting treatment for the deficit in the USS pension scheme and capital grants received during the year.

We are required to reflect the future value of payments due to be made over the coming years to USS to fund the actuarial assessed deficit in the scheme. This helps ensure that the future value of assets in USS are sufficient to pay the pension benefits earned. We had to recognise a very significant expense of £105.9 million in the 2018/19 accounts following the 2017 valuation of USS, leading to an overall reported deficit of £67.7 million. A subsequent valuation was undertaken in 2018 to respond to some of the recommendations of the Joint Expert Panel. This resulted in a reduction in the USS deficit and consequently the level of deficit recovery payments the University is contracted to make.

We have had to reflect this change in the 2019/20 accounts by reversing £63.6 million of the expense charged in the previous year in our income and expenditure statement. This is responsible for the majority of the £81.8-million surplus, alongside £26.7 million of capital grants (income received to pay for new assets where the expense is recorded initially on the Statement of Financial Position and not as operating expenditure). This leaves an underlying deficit for 2019/20 of £8.8 million, which was funded out of reserves.

Looking ahead

The lead indicators for our institution such as research grant awards and student applications look very promising for the future. Our Board of Trustees this month approved a plan to invest more in people and research in the New Year, if and when the present risks relating to student participation in on-campus learning recede.

In the meantime, we need to keep proceeding with care over the next few months as the government rolls out its Winter Plan for managing COVID-19.

It has been a very difficult year for our community, but your collective efforts have helped steer the University though what I’m sure we all hope has been the worst of the storm. As normality slowly returns, we will continue to invest in our academic endeavour, our Professional Services, and the future facilities we need to restore our place among the world’s top 50 institutions.