The University of Reading is currently facing a financial and governance crisis as it reported itself to regulators over a loan of £121m. The university is conducting an internal investigation to determine whether it unfairly benefited from the sale of land belonging to the National Institute for Research in Dairying trust. The £121m from the land sale was spent by the university, which then replaced it with IOUs in the trust’s accounts. Robert Van de Noort, the university’s acting vice-chancellor, stated that they did not meet the governance standards expected as the sole trustee of the charity. Reading achieved university status in 1926, which now consists of 15,000 students and 4,000 staff, with an annual spending of almost £350m. The university’s recent financial struggles include large losses from a foreign venture, falling undergraduate student numbers, and operating deficits totalling over £40m in the past two years.
The financial constraints facing the education sector in England are predicted to worsen. Due to Brexit, the UK may face difficulty in attracting students, staff, and research funding from the EU. Last year, funding ordered by Theresa May could reduce undergraduate tuition fees to less than £7,000 from the current £9,250 a year. Reading has informed the Charity Commission and the Office for Students (OfS) of its latest development. Two teams have been established to investigate complex issues of the university’s potential conflict of interest as a borrower and trustee.
The OfS is the principal regulator of English higher education charities to ensure compliance with charity law. The trust funds the National Institute for Research in Dairying, established in 1912, which aims to promote and develop high-quality agriculture and food research at the University of Reading. The trust comprises the University of Reading as a sole trustee and beneficiary. According to Reading’s accounts, the trust’s remit goes beyond offering a loan on undisclosed terms to its sole trustee. The land sales and loans were completed under the previous vice-chancellor’s leadership, Sir David Bell, one of the country’s most prominent educationalists. Reading was already struggling financially before the discovery and is now left with operating deficits of £22m and £19m for two years, with £121m owed to the trust and £180m to external creditors.
The university has faced significant difficulties in achieving its recruitment targets for undergraduate students, with last year’s intake down by 650 students. In an attempt to expand into the lucrative overseas market, the university formed a campus partnership in Malaysia. However, this venture has resulted in losses amounting to £27.6m, which the university had to write off in its latest accounts.
To manage costs and address the challenges, the university announced a voluntary redundancy scheme in January, where staff could choose to opt-in. Angela Rayner, the shadow education secretary, expressed concerns that the university could become a victim of the free-market model in higher education. She stressed that a major university going bankrupt and closing its doors would significantly hurt not only the education sector but also local economies and communities. Therefore, the government must take corrective measures to avert such situations from happening.
Despite Reading’s financial issues, it is not alone, as several universities also faced similar financial distress. Last year, a few of them had to secure bridging funding, and one had to obtain a short-term loan from the regulator to address cashflow problems.