University of Dundee: Can a Phoenix rise from the Ashes?
Dr Carlo Morelli, DUCU, 21 April 2025
Five months on from the revelation to the University of Dundee Court on 12th November 2024 of a £30m deficit we have arrived at the same conclusion that was known from day 1, namely the Scottish Government would have to bail-out the University.
The intervening five months has seen the University lurch from one disaster to another, such that we now have an advisory group of Scottish University Principals supporting what remains of the University Executive Group (UEG), an internal audit being carried out by PricewaterhouseCoopers, a Scottish Funding Council-funded Investigation into Financial Oversight and Decision Making and most recently the Scottish Government’s Advisory Strategic Taskforce.
The reason for such high-level intervention has been the utter failure of the UEG to change direction since 12th November or to demonstrate competence. Instead, the UEG has been burning the University to the ground. It has been completely unable to gain bank finance, running down the clock on its ability to pay salaries and keep the lights on, provided textbook examples of how to fail at public relations with the, now abandoned, proposal for a £200K appointment of an Interim Transformation Director and had its competency questioned in public in their infamous appearance before the Scottish Government’s Education, Young People and Children Committee.
The result of this has meant that 6 of the 9 original UEG members have left or are leaving the University or are on special leave. Interims brought in to bolster the UEG have made no attempt to stop the destruction of the University and are ploughing on with the original plan to sack more than 700 staff.
UEG’s kneejerk plans to restructure the University from schools to faculties are presented as a way to address funding problems, but even if the restructuring goes well any realistic gains from a new structure will be tiny compared to the losses that UEG have inflected. The current crisis will make it much harder to restructure well, so – even if restructuring is wanted in future – it should not be carried out now.
A financially secure University – at least for now
It may come as a surprise to know that the immediate threat to the University’s existence, due to poor cashflow, has been averted in the short-term. The Government bail-out of £22m provides the liquidity needed until the normal funding cycle for 2025-26 starts in August 2025. Students considering their options and arriving in September can be confident that the University will have arisen from the ashes, that modules and programmes will be running, and that staff at the University will be delighted to welcome them.
The University’s financial crisis was explained as a cashflow crisis in which the University would run out of cash to pay salaries in June 2025. Below is the evidence of
the extent to which the cash balances held by the university were being used to bankroll an emerging cashflow crisis. Data from the University’s Annual Financial reports show cash balances falling continually from a peak of £105m 2020-21 to £32m in 2023-24 and, then as reported to the Education, Young People and Children Committee £0m in June 2025.
What the chart also shows is that the cash balances from 2020-21 onwards were very different prior to the boom in international student recruitment and the income from the sale of spin out companies in the post covid boom. The University’s income over the four years from 2020-2021 to 2024-25 saw a cumulative increase of more than £100m compared to the historic level of income. It is the expenditure of this additional £100m that is at the centre of the University’s funding crisis.
Source: University of Dundee, Annual Financial Statements 2012-13 to 2023-24
The Government’s £22m bail-out has brought the University’s cash balances closer to their historic level, prior to the post covid bubble. In fact, we would argue, the cash balances need a further input to bring it up to levels pre-covid. The average pre-covid cash balance before 2020-21 was £34m and thus the £22m is short of around £12m. Why the University did not ask for this additional funding, especially when the Scottish Government has repeatedly stated further funding would be considered if requested, remains unanswered. What cashflow data shows is that a small structural deficit exists, not the £75m black hole claimed by the University.
A manufactured crisis
The University’s UEG have all along claimed rising staff costs are the central cause of the strategic deficit. In 2023/4 staff numbers (FTE)rose by 6.8% but the staff costs rose by only 5.5%. This clearly demonstrates that each member of staff is costing the University less. All independent analysis has instead identified the large increase in capital expenditure on land, buildings and equipment, such that its unreserved assets have risen from £160 to £230m last year alone. When it comes to staffing, the numbers of staff, due to unfilled vacancies and a hiring freeze, is now back to pre-covid levels. Staffing costs will now fall regardless of any action taken by the UEG.
The continued uncertainty for staff, students and prospective students is now damaging the University for the future. What could have been resolved within weeks, in a collaborative approach involving staff, students and the Scottish Government, by being transparent about the financial position of the University has been strung out for over 5 months by a UEG whose personal agenda has been placed higher than the reputation and stability of the University.
Rising from the ashes
Protecting educational provision is now a key requirement for the future of the University. Student numbers will again be hit in 2025-26 by the contradictory messages coming from the University management. Informing the Scottish Government that modules and programmes will be significantly cut while telling prospective students the opposite is the case is not a way to build trust in the running of the University.
Instead, a new model of higher education is required. It should be one that recognises that marketisation of UK higher education, based upon pushing unsustainable debt onto students must be abandoned.
UK higher education has been run as a price fixing cartel since student fees were introduced. Universities across the UK have charged students the maximum possible for their education. Fees for UK students, from outside Scotland, are set at the maximum level of student loans. For Scottish students, where tuition fees are not charged, prices for accommodation are set at the maximum debt provided to students through the Student Loan Company. For international students too the commissions and agency fees paid out of students’ tuition fees to private recruitment companies runs to many millions of pounds per university per year.
The University of Dundee must now abandon this price-fixing cartel and slash these costs, and in so doing increase the number of students coming into the university. As any first-year economics student will tell you, if you charge a lower price demand increases.
There can be no stronger signal that the phoenix will rise from the ashes than publicly committing to a genuine, sustainable and coherent recovery of the University which
must include no compulsory redundancies, more transparent and democratic management and governance, and more realistic fees and accommodation costs at the University of Dundee.