Highlights from AUDE’s Higher Education Estates Management Report

Unless you have been avoiding the news in recent years, it will have been hard to miss the headlines highlighting the escalating financial pressures for the higher education sector amidst the challenging financial backdrop. 

AUDE has recently published its Estates Management Report, with insights from the 2022-23 academic year, to encourage discussion on financial viability for universities and explore key themes that form part of that conversation such as; operating costs (focussing on energy), income, sustainability and student experience. AUDE has also helpfully summarised its findings in its executive summary of the report.  Please do take a look at these documents (available to AUDE members here) for an invaluable insight into the current challenges universities are facing – what follows however are some non-exhaustive, high level thoughts in relation to the unprecedented challenges facing the higher education sector. 

Some observations: 

• Rising energy costs have been the largest contributor to rising property operating costs, with energy costs rising by 107% within a two year period - the Report highlights the unprecedented situation in that the energy spend is commensurate with property repair and maintenance. Where available to them, some universities may consider generating their own energy on campus. However, this option will only be available to universities who either have the space available or have diversified their property portfolio to facilitate it. 
• Income from a variety of streams (such as residential, research, catering and tuition fees) has on the whole increased, however this has not kept in line with inflation and the increase in operating costs. 
• Universities are facing difficult choices when trying to balance the harsh realities of managing their operational spend and achieving their sustainability goals.  
• There has been a systematic failure to rebuild capital estates programmes post pandemic. 

How can universities generate energy on campus? 

Universities with larger portfolios may consider installing renewable infrastructure to generate their own energy and therefore reduce their outgoing energy spend. Examples of this infrastructure include wind turbines and solar panels. The Report highlights that onsite renewables makes up less than 1% of the total amount of energy consumed and so there is work to be done within the sector to address this. 

Not only can such infrastructure reduce energy costs, but it can be an effective strategy in working towards a net zero carbon campus through offsetting. 

Of course, only universities with sufficient space and financial resources to acquire the infrastructure will be able to consider this option, and so it is not a “one size fits all” approach. Higher education institutions will need to consider how to effectively manage the amount of space needed for university operations and building “smart campuses”; keeping them competitive within the sector, but with the underlying objective of addressing the unprecedented rise in not only energy costs, but operational expenditure generally. 

University tuition fees and the impact on income 

University tuition fees for “home” students in England are set to rise by up to £285 in the 2025/26 academic year – this is the first time they have risen since 2017! The fees have therefore failed to consider the sharp rise in inflation in recent years, translating into the amount of income per student eroding by over a third. Whether universities can pass on the increase will depend on the terms of their contract with students (see here). Even for those that can, the increase is likely to be negated by the recent rise in national insurance contributions. The Report suggests that not even an inflation-level rise would improve the position, albeit it could potentially stabilise. 

With an increase in tuition fees, arguably universities will be under more pressure to improve operations and address students’ needs. The failure to rebuild capital estates programmes post pandemic, which the Report highlights, may need to be addressed in the upcoming academic year to provide students with reassurance that the increase in tuition fees is being spent on the capital projects higher education establishments need to invest in to remain efficient and competitive. 

Balancing act 

The key theme emerging from the Report is the need for universities to balance competing objectives; the need to remain competitive and provide students with high quality, sustainable, facilities, whilst trying to utilise the financial resources available to them. Universities will need to consider how they can increase their resources by thinking innovatively and addressing increased operational costs by considering how they can most effectively utilise and diversify their campuses. “Green targets” will likely underpin some of these decisions, with the need to keep on track to achieve sustainability objectives that have been set.

The state of the economy is one of the largest factors impacting the ability to balance and the need for Government support is higher than ever. 

Further information about our financial resilience taskforce is available here: University financial resilience taskforce | Mills & Reeve.

Our content explained