Financial impact of the COVID-19 (coronavirus) pandemic
The impact of the coronavirus pandemic is being felt right across society, affecting the way we live and work in ways that would have been unimaginable just a few weeks ago.
Quite apart from the tragic loss of life, the economic implications are profound. These implications are affecting all sectors and higher education is no exception.
This may have caused anxiety and concern for some colleagues, and understandably so. The information on this page is intended to provide clarity and alleviate some of that anxiety for staff and explain the expected financial impact of the pandemic.
The current financial position of the University means that, unlike some other institutions across the UK, we are not in a crisis situation. The prudent and pragmatic approach followed over a number of years means that Queen’s is well positioned to face the current challenges in the short-term and can subsequently make strategic decisions for the long-term. You can be confident in the long-term future of Queen’s University.
We must also be realistic about our current operational position. Before the pandemic became a reality we had a projected operating deficit position for 2020-21, meaning that our expenditure was expected to exceed our income in this year. As you will appreciate, we expect the pandemic to exacerbate this and have a significant negative impact on our revenue in 2020-21.
Impact on Revenue in 2020/21
Other than the annual grant we receive from government (that we do not expect to be affected this year), the University primarily generates revenue through three channels: tuition fees, research funding and ‘commercial’ operations such as accommodation and conferences. There is still a great deal of uncertainty about the extent to which each of these revenue streams will be affected this year – particularly tuition fees. However, for each of these streams, 'best case' and 'worst case' scenarios in terms of lost revenue for the forthcoming academic year have been modelled to facilitate planning.
It is impossible to accurately gauge what the total deficit will be as it is dependent on so many factors but we do expect the impact on our revenue to be significant for 2020-21, particularly in terms of tuition fee income. We estimate that there could be a reduction of £30-£90 million in total revenue this year as a result of coronavirus.
Such a significant drop in revenue, in such a short space of time, will mean that action must be taken to mitigate the impact. Although the University Executive Board has decided to implement some short-term measures, described below, the emphasis must be on minimising the loss of revenue. Our student recruitment teams are doing everything they can to continue to encourage prospective students to come to Queen’s and assure them that they will be safe, well looked after and receive a world-class education and many colleagues are working hard to ensure that we are able to deliver a high quality experience for students in 2020-21. It is more important than ever for all of us to focus our efforts on attracting students, building our reputation and growing our University.
The University reserves are significant and are often referenced as a solution to this (and other) problem(s). There are two important factors to this that must be understood. The University reserves are, essentially, savings and can only be used once. They are therefore used carefully for key capital projects and to pump-prime initiatives of strategic importance. They should not be used for operational reasons to cover a shortfall unless unavoidable. The second factor that is often misunderstood is that only a proportion of reserves are realised and unrestricted and therefore readily available to support short-term pressures. The remainder are unrealised reserves (valued on paper but only confirmed when a transaction is completed), for example, shares which were valued at a point in time pre-COVID or a valuation of University buildings, or restricted reserves, for example, a donation of money to be ring-fenced for a specific purpose at the request of the donor.
As a result of the current projected operational deficit described above and the projected drop in revenue for 2020-21, the University will be using those reserves that are available to meet commitments in the short-term. This provides the flexibility to focus on making the correct long-term strategic decisions as opposed to more drastic reactive interventions that may be required at other institutions.
There is still a considerable degree of uncertainty regarding the long-term impact of the coronavirus pandemic. It is therefore essential that we do not use more of our savings than necessary. It is for this reason that a number of short-term interventions have been agreed to reduce our cost base for 2020-21.
Reducing costs for 2020-21
The University Executive Board are considering ways to reduce costs on a weekly basis. Protecting jobs and preserving the student experience are their priorities. Redundancy is something that many people across society have suffered as a result of the pandemic, but there are no current plans for any members of staff to be made redundant at Queen’s.
Measures that have been agreed to reduce costs in the short-term, to allow us to plan in a more strategic manner for the long-term, include the following;
- Staff recruitment freeze
All recruitment of staff that is not considered absolutely essential has been suspended with an ambition to increase the vacancy rate to 6%.
- Targeted savings from non-pay budgets
Non-pay budgets will be reduced in some areas for the 2020-21 financial year, with a target of 20% saving across the University. Details will be provided at a local level.
- Release of provisions
Provisions that the University was holding for future scenarios (for example Brexit implications) have been released.
- Strategic Research Equipment Fund Reduction
A central fund used to invest in large-scale research equipment that has strategic benefits has been reduced by 75% for the forthcoming year.
- Capital Plans
Existing commitments regarding capital projects currently underway will be honoured but these projects may be re-phased appropriately. Future capital development projects will be critically reviewed.
- Furlough/Job Retention Scheme
The University has carefully evaluated the Government’s job retention scheme. Details of how the University plans to access the scheme will be released over the coming days.
More detail regarding each of these measures and how they may affect local areas will be cascaded as necessary over the coming days and weeks.
The University will continue to provide updates and information about any substantive decisions that will affect its staff as soon as possible.