Will universities need a bailout to survive the COVID-19 crisis?

Abstract

The ongoing COVID-19 crisis poses a significant financial risk to the UK higher education sector. Universities are facing big losses across a range of income sources and investments. These losses could cause serious financial problems, including -in the extreme -insolvency. Most institutions will be left with reduced net assets, which could increase financing costs and will leave them less well placed to cope with future adverse shocks.This briefing note examines the resilience of university finances to the likely consequences of the COVID-19 outbreak and the public health response to it. For UK higher education institutions, we estimate the likely financial losses associated with the crisis under three different scenarios, reflecting different crisis trajectories in the coming months. We assess the chances of insolvency and estimate the cost of potential bailouts to the taxpayer.Our main findings are:  The total size of the university sector's losses is highly uncertain: we estimate that long-run losses could come in anywhere between £3 billion and £19 billion, or between 7.5% and nearly half of the sector's overall income in one year. Our central estimate of total long-run losses is £11 billion or more than a quarter of income in one year.

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