Research activities continue to create a “substantial deficit” for English and Northern Irish universities, with new figures showing that they cost the sector more than £5 billion last year alone.

The Office for Students’ (OfS) annual costing analysis revealed that universities in the two countries had an aggregate deficit of £2 billion in 2023-24.

 report, which calculates how much universities recover from certain economic outlays, found that research was the biggest drain on finances. The 150 institutions in the sample recorded a deficit of £5.4 billion in research activity last year, which was a 13 per cent fall from £4.7 billion in 2022-23.

The OfS said the downward trend “reflects the increases in operating costs due to increases in staff costs, including pension costs, and inflationary increases in other operating expenses, particularly estates and research facilities” – just as it did last year.

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Across the sector, two-thirds of full economic research costs were recovered – down from 69 per cent the year before and from a peak of 78 per cent in 2010-11.

Research costs made up almost half (48 per cent) of the total costs of universities with the highest levels of research income (Group A). But those in this group recovered 70 per cent of their costs, compared with just 41 per cent for those in Group D.

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Along with research, the sector again made a significant loss on teaching domestic students. The TRAC data showed that it incurred a deficit of £1.7 billion on publicly funded teaching compared with £1.5 billion in 2022-23.

“The funding gap in publicly funded teaching has continued to widen due to sustained cost pressures, particularly rising staff-related expenditures, such as increased pensions obligations, alongside other operational expenditures,” the OfS said.

“This has occurred despite efforts to reduce costs, rationalise academic portfolios, and enhance efficiency, while tuition fees for publicly funded provision have remained unchanged.”

The full economic cost recovery rate fell to 89 per cent. This represents a large fall from 2016-17, when domestic teaching just about broke even among the universities sampled that year.

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However, the sample institutions reported an increase in the profit made from international students. The surplus generated from non-publicly funded teaching increased from £3 billion to £3.2 billion, recovering about 143 per cent of costs.

Group A universities recovered 172 per cent of costs for this activity on average. The lowest surplus was for those in Group E (110 per cent).

The OfS said that while income from international students continues to make a “significant contribution to support other activities, it does not provide sufficient surplus to offset” deficits elsewhere.

It was enough to reduce the sector’s deficit overall, however. The £2 billion aggregate deficit was a “modest” improvement on £2.9 billion in 2022-23, according to the report.

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Total income rose by £2.4 billion, including more than £1 billion in new endowments and donations. Interest and finance costs decreased by more than £100 million and other income-generating activities also reduced in cost by over £100 million.

patrick.jack@timeshighereducation.com