VC update on response to financial climate

Dear colleagues,

I’m writing to update you on how we are managing the challenges arising from the ongoing economic pressures in the UK and globally. As we all see in our daily lives, high inflation rates are having a major impact on costs. As with everyone’s household budgets, this is also having a profound impact on our University.

Our governing Council will today discuss options put forward by UEB to maintain our long-term financial stability. In the usual spirit of transparency, I want to provide you with the latest information on where we stand.

I want to start by assuring you that we will not be rushing into any short-term, knee-jerk decisions. While the current financial challenges are significant, we are well positioned to face them: the Strategic Foundations Programme, now well under way, is addressing many of the underlying complexities and costs of the University’s operation; through the ‘Phase 1’ agreement with the UCU Reading branch and the Staff Forum, we have managed to deal with the financial impacts of the Covid-19 pandemic well; the commercial development activity we started four years ago is something of a success story and now provides us with a higher degree of financial stability; and, importantly, we are in a strong student recruitment position for entry in September 2023.

So, I am confident that, although the cost-of-living crisis and high levels of inflation are serious, if we act together, we can not only weather the current economic storm but emerge in a strong position.

It is clear, though, that difficult decisions lie ahead. The cost saving and income generation measures that we have taken over the last three years, aimed at addressing the impact of the pandemic, are not sufficient to address this new situation arising primarily from high inflation. Further action is needed, both for the current financial year and for the coming five-year planning period.

Current financial year 2022/23

As you would hopefully have seen last week, we will be going ahead with the national pay uplift. This is so important given the huge strains on personal finances that colleagues are struggling with now. It does, however, increase the University’s salary costs by more than £5 million a year. In addition, other costs have also increased dramatically due primarily to inflationary pressure. To meet our commitment to Council to keep our deficit to £13.7 million this financial year, we need to take some immediate steps to make approximately £6 million of savings by end of July this year.

• Existing vacancy controls for filling vacant posts and creating new ones will become more stringent, and only the most critical vacant posts will be filled. I fully understand the strain that this may place on teams with vacancies, and it is not a decision we take lightly. However, it is the single biggest thing we can do to meet our savings target.
• In addition to these controls, UEB has already been talking to Heads of Schools and Functions about additional checks to reduce, delay and cancel spend wherever possible. There are steps we can all take to help such as reducing travel, saving energy and waste, and considering all spending very carefully – essentially the same that we are doing at home.

Five-year planning period from 2023/24

It was previously agreed with Council that we would return to a surplus by 2024/25. Current circumstances mean that is no longer possible, so we will be seeking Council’s agreement today to return a deficit again next year, of £30 million, on the basis that we then have time to make the right decisions for the long term. Our goal is to return to a surplus position by 2026/27.

We are using our usual Planning and Change Board annual five-year planning process to do this, ensuring that decisions are made in a consistent and strategically aligned way across all Schools and Functions. While we undoubtedly need to make significant savings in coming years, growing our income is also critical for financial sustainability. Any savings decisions must therefore not prevent us from delivering a high-quality education to a growing number of students in coming years. This means that critical investment – such as that in digital and physical estates improvements – will still go ahead, but may need to be phased and prioritised over a longer timeframe.

I emphasise that no decisions have yet been made about longer term savings and restructuring, and today Council will consider several options put forward by UEB. This will be followed by discussion with both the UCU and Staff Forum, as we did with our pandemic 'Phase 1’ plan. And, I will continue to share plans with you as they are developed and seek your input. Council will not make any final decisions about future budgets until July this year.

To be as open as possible, the minutes of all Council meetings are available if you wish to read them in detail on the Governance Zone webpages.

Working together as a community

I appreciate that this news will be concerning for our community. I feel the weight of this responsibility keenly, as do all my UEB colleagues. It has already been a difficult few pandemic years, and the prospect of further financial challenges is dispiriting. As with the pandemic response, though, our strategic principle of Community will define our response to this current situation – by acting together and sharing the load to cut spending and support growth, we reduce the need for the sort of restructuring that requires compulsory redundancies. This will not be easy, and it will require a significant effort from all of us. However, I am certain that we can meet this challenge by sharing responsibility as a community and maintaining our commitment to transparency and open dialogue.

I will report back again soon following Council’s discussions, and I invite you to the next all-staff briefing on 29 March, which will provide us a chance to discuss these issues in more detail and for you to share your questions and thoughts. You will receive an invitation to this session shortly.

I want to close by thanking you for your continued commitment and dedication to the University. I understand that this is a challenging time, but I have no doubt that we will overcome these difficulties and emerge stronger and more resilient as an institution.

Kind regards

Robert

Robert Van de Noort
Vice-Chancellor
University of Reading