Colleges in Scotland have lost an estimated £25 million in income this academic year alone as a result of the coronavirus pandemic, the chief executive of the Scottish Funding Council has said.

Speaking in front of the Scottish parliament’s educations and skills committee this morning, Karen Watt said the financial impact on FE institutions had been less severe than that on universities. Nevertheless, the current estimate was a £25 million loss this academic year, “but much greater going into next [academic year].”

With the most recent figures showing college income at around £711 million in total, that is a loss of about 3.5 per cent. The SFC states that is mostly down to lower income from funding streams including the European Social Fund, the Flexible Workforce Development Fund, tuition fees and education contracts, as well as college nurseries, accommodation, catering, short-courses including evening classes and other commercial activity including international income.

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Cashflow concerns

Umbrella organisation Colleges Scotland estimates that the loss in income next year could be £70 million – almost 10 per cent of total income. This, Colleges Scotland said, may lead to insufficient cashflow in some institutions to meet their financial commitments, including staff costs and external contractual requirements.

Covid-19 had been a “unique and significant shock” to further and higher education in Scotland, Ms Watt stressed, stating this could lead to a particularly significant loss of income in 2020-21.

The SFC was prioritising providing stability and continuity to both sectors, she stressed. The loss for the university sector was an estimated £72 million this year, but this could rise to £400-650 million next year, depending on what happened with international student intake.

The SFC was also closely assessing the impact of Covid-19 on students, and with the SFC responsible for college student support, the SFC had brought forward funding and published guidance to enable colleges to support learners.

“I would like to pay tribute to colleges and universities,” Ms Watt said. “They have responded very swiftly and very responsibly from the outset,” she added, saying they had quickly moved teaching and assessment online and taken care of the wellbeing of staff and students, as well as making a huge contribution to the “national Covid-19 effort”.

In a written submission to the committee, Colleges Scotland said the impact of the Covid-10 crisis will “significantly exacerbate an already very difficult financial and operating environment”.

The organisation said that Audit Scotland’s report, Scotland’s Colleges 2019, highlighted the precarious financial challenges already facing the sector prior to Covid-19, and without financial support, colleges “will record a significant operational deficit for the year ending 31 July 2020, leading to a material reduction in the level of cash held by colleges”.  

“In some colleges, this may lead to insufficient cashflow to meet their financial commitments, including staff costs and external contractual requirements. We estimate that the reduction in income across the sector will be around £40 million, leading to a deficit of £25 million in this academic year 2019-20, and an estimated loss of income of over £70 million for the next academic year 2020-21.”

“The SFC has recently offered a welcome assurance on cash flows and some aspects of financial consideration, though there are additional queries which remain outstanding and we are working together to take these forward. We are seeking similar assurances from the Scottish government and SDS to provide similar arrangements with apprenticeship milestones to support cashflow management to enable current business continuity and sustain the apprenticeship and employability training infrastructure.”

Shona Struthers, chief executive of Colleges Scotland, said: “The college sector was facing substantial financial challenges before COVID-19, and the pandemic’s impacts are forecast to cause a loss of income of approximately £100 million, mainly through a decline in commercial revenue. 

“As in previous times of financial downturns, the college sector will be essential with its capacity to protect people hit the hardest through its social inclusion delivery and in driving Scotland’s economic revival. 

“Colleges will power regional economic recovery and development across Scotland with their ability to quickly deliver short, full-time courses to retrain, upskill and provide people with the employability skills businesses need, but the sector requires financial assistance from the Scottish government to maximise its positive impact on Scotland’s society and economy.”