Will any universities go bust?
The universities have already been told that they face cuts in their HEFC grants next year of about 6%. That is a cash cut in the grant and nothing for inflation.
There are some universities which are now on the edge financially and are likely to end up merging with others. One of the difficulties they face is that the financial cost of reorganising staffing is now sufficient to take out cash balances.
This could push some of the Universities that are constituted as limited companies into administration. That is an issue that the government has to look carefully at.
With appropriate support from government the education of the students need not face massive disruption. However, without that all sorts of disruption is likely to occur.
Luckily Birmingham University is in a relatively strong financial position even though it is likely to find its grant of £130 Million cut by £6 Million next year.
This is not just part of the pre-budget report, but also part of current financial planning. I hope to get some of the IFS reports from the PBR so I can publish them.
That will demonstrate the clear financial challenges faced in the public sector. Those challenges are faced regardless of who is in government.
The university issue is one where there is economically a local multiplier and other private economic activity rests on what is substantially a public funded institution.
This is why it is important to avoid simply going for deflation and a subtle approach to finance is needed.