Severance spending at top UK universities surges

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

More than a third of elite UK universities were forced to make further staff cuts last year, while severance spending across the Russell Group rose by more than a fifth, according to Financial Times analysis.

Ten of the 24 universities in the group said they ran voluntary severance schemes in 2024, offering staff compensation packages in exchange for taking voluntary redundancy.

Payouts for staff redundancies rose after a sharp drop-off in lucrative foreign students. Analysis of annual financial statements showed that collectively 22 Russell Group universities paid £70mn last academic year, a 29 per cent rise on the £54mn spent in 2022-23. Two universities did not provide data.

The findings demonstrate the exposure of top higher education institutions to the sector’s mounting financial pressures.

The retrenchment among the Russell Group mirrors cost cutting across the sector which has resulted in universities announcing course closures and travel and entertainment bans as well as staff cuts.

Russell Group chief executive Tim Bradshaw said the cutbacks were needed to make institutions financially sustainable but insisted the government should do more to help a sector whose research was integral to the UK’s growth and innovation agenda.

“Alongside the steps universities are taking, we need the government to help secure a sustainable system for funding higher education,” he said.

Vivienne Stern, chief executive of Universities UK, the main sector lobby group, said the belt-tightening was a sign of institutions putting their houses in order but posed potential risks.

“The danger is that nobody is looking at the overall consequences of this, and the risk that you develop system-wide problems,” she added.

Repeated cuts had sapped staff morale, union spokespeople added. Jo Grady, general secretary of the University and College Union, which represents lecturers, noted that “year-on-year cycles of restructures and redundancies” had failed to deliver stability.

The Department for Education said it was taking “tough decisions” to stabilise universities at a time when public finances were constrained, adding that the Office for Students regulator was closely monitoring the sector’s financial sustainability.

“Whilst [academic] institutions are autonomous, we are committed to restoring universities as engines of opportunity, growth and aspiration,” it added.

Paul Kett, PwC senior adviser on education, said consolidation in the sector threatened more expensive and less popular courses, such as chemistry, while leading to potential “cold spots” in provision.

Stern said the precipitous drop-off in international students — who typically pay around three times the annual UK fees of £9,250 — had blindsided universities previously encouraged to recruit internationally to make up for a decade–long freeze in tuition fees.

Applications for UK study visas fell from 474,000 in 2023 to 408,000 in 2024, according to Home Office data, following a decision by the previous Conservative government to remove the right of postgraduates to bring family members.

The situation was exacerbated by a currency crisis in Nigeria, a key growth market, and competition from other popular destinations, such as Australia and the US, reopening following the Covid-19 pandemic.

A report from the OfS estimated a £3.4bn decline in net income across the sector by 2025-26, with nearly three-quarters of universities forecast to be in financial deficit.

A total of 4,900 staff from 21 Russell Group members received severance payments in 2023-24, up by more than a fifth from the previous year. Cardiff, Edinburgh and Glasgow did not give details of the number of staff receiving payouts.

The group spent more than £348mn in 2023-24 prices on redundancy programmes since the start of the pandemic, when many international students were prevented from travelling.

Nottingham and Newcastle had the largest rise in payments, paying out almost £14mn and almost £6mn to former staff, respectively — nearly 10 times the previous year.

At Newcastle, staff cuts and recruitment freezes were accompanied by bans on overtime, external hospitality and travel.

Newcastle said its higher severance spending was partially linked to the closure of an accommodation block. Nottingham declined to comment.

Exeter also significantly increased its severance pay to £8.8mn in the last academic year, up from £1.3mn in 2022-23, blaming frozen tuition fees and declining international student numbers. 

“At Exeter we foresaw these challenges and acted proactively, taking concerted action across our operations to ensure we sustain our strong financial position,” a university spokesperson added.