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Universities 01 Oct 2026
Scottish university finances worsen despite more public funds
By Isaac Barbosa
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Image: julien ortet [ CC BY-SA 2.0 ], via Flickr
Scottish Funding Council report also forecasts declining research income through to 2027-28
Scotland’s universities are forecasting their finances to worsen in 2026-27 despite an uplift in public funding, according to a report from the Scottish Funding Council.
On 1 October, the SFC published its annual report on the financial sustainability of universities in Scotland, based on their accounts for the 2024‑25 academic year and future forecasts by institutions. The SFC is responsible for sustaining higher and further education in Scotland, allocating about £2 billion a year.
The SFC said that its report rings “warning bells for some key measures of financial sustainability”. Paul Devoy, interim chief executive of the SFC, said the nation’s universities are “operating in one of the most challenging financial environments the sector has faced for many years”.
Surplus eroded, deficits widespread
The report finds that the Scottish university sector had an overall adjusted operating surplus—money left over from normal operations—of £90.6 million in 2024‑25. This figure is expected to have decreased to £67.9m in 2025-26 and is forecast to shrink further to £36.8m in 2026‑27.
In addition, 10 universities reported adjusted operating deficits in 2024‑25, with the same number forecasting deficits for 2026‑27, despite an increase in SFC funding, The SFC uplift , announced earlier this year, includes an 8.1 per cent rise in research and innovation funding and a 3.3 per cent rise in teaching funding.
The report suggests that the decline in the forecast 2026‑27 surplus reflects “lower growth in tuition fees, reduced research grants and contracts and investment income”, alongside higher staff costs from pay pressures.
For 2027-28, it forecasts that the surplus will grow again, to £73.1m, largely because of what the SFC describes as “optimistic forecast tuition fee assumptions by many universities”.
Expected research income cut
The report also finds that income from research activity accounted for £977m of total income in 2024‑25, and that institutions are forecasting an overall decline of 3 per cent across the three years to 2027-28.
However, the SFC also notes that institutions are expecting there to be “increases in research income and other income” after 2026-27.
The annual report identifies a significant skew towards the country’s four “ancient universities”—St Andrews, Glasgow, Aberdeen and Edinburgh—which it said accounted for about 75 per cent of research income in 2025‑26.
Flat-cash budget concerns
The scale of SFC support for Scottish universities from 2027‑28 onwards has not yet been determined. A draft budget will be published by the Scottish government in early December.
In the report’s forecasting, it assumes a flat-cash settlement from 2027 onwards. Despite the projected increase in the sector’s surplus that year, the report warns that a flat-cash settlement would place “significant additional pressure on finances”.
“Combined with wider sector risks, including economic uncertainty, immigration policy changes and reliance on a volatile international student market, flat-cash funding is expected to increase operating deficits, reduce cash balances and heighten reliance on already substantially restricted reserves,” the report says.
This would increase the need for efficiency measures, including voluntary redundancy schemes, and constrain investment in strategic priorities and capital projects, it adds.
View this article on Research Professional