‘Grim’ report warns most of Scotland’s colleges are ‘not sustainable’

Most of Scotland’s colleges are “not sustainable” while over half of the country’s universities are expected to report operating deficits this year, “grim” new reports from the Scottish Funding Council (SFC) have revealed.

The body, which funds both universities and colleges in Scotland, published new reports on the financial sustainability of the further and higher education sectors.

It found that “financial sustainability remains challenging for many universities”, with the SFC revealing nine of the country’s 19 universities reported underlying operating deficits during 2023-24 – with this increasing to ten in 2024-25 and set to rise again to 11 in 2025-26, before reducing to seven in 2026-27.

And while the university sector reported is forecasting an underlying operating surplus of £51.5m for the academic year 2024-25, the report said that this “is expected to decline to a deficit of £12.9m in 2025-26” before then recovering and returning to a surplus of £134.9m in 2026-27.

For colleges, the SFC found that “substantial adjusted operating deficits are forecast over the next three years”.

It stated: “Twenty-two colleges (92%) are forecasting adjusted operating deficits in 2025-26, reducing to 21 colleges (88%) in 2026-27 and 20 colleges (83%) in 2027-28.”

The report added: “These forecasts show that most colleges are not sustainable.”

The financial position of colleges “continues to be extremely challenging”, the SFC said, noting that they have to operate in an “extremely tight fiscal environment alongside many challenges such as increasing staff costs, general cost pressures and high energy costs”.

The funding body found that “colleges and universities face similar risks to their financial health” with these including increasing staff costs, inflation and high energy costs as well as the possibility of “unanticipated public spending cuts”.

Scottish Conservative education spokesperson Miles Briggs said that the reports “make for grim reading for the future of Scotland’s colleges and universities”.

The Tory added: “The dire state of their finances is the inevitable consequence of the SNP’s mismanagement of the sector, which has already led to jobs being lost, students being denied places and key courses being cut.

“The SNP has presided over more than a decade of decline that has put our iconic universities on the brink and our colleges at serious risk of closure. Unless they change their failing approach, this situation will spiral out of control.”

SFC chair, Professor Cara Aitchison, said while the reports “reports represent a snapshot in time” she added that “the trends we’re seeing indicate the serious implications of the tight fiscal environment in which colleges and universities are operating and the need for action to address the challenges they face”.

The SFC is “increasing levels of engagement and monitoring activity for those institutions facing the highest risks to their financial health”, she added, saying they were “working with them to understand and assess plans to bring them back to a sustainable position”.

But Mary Senior of the University and College Union said: “It comes as no surprise to workers in Scotland’s universities that the sector is in financial crisis, given the number of jobs under threat or already disappearing, and the derisory pay offers being imposed.

“To see over half of Scotland’s universities in a deficit position for this academic year 2025-26, and the operating surpluses of the sector decline by over 90% between 2022-23 and 2023-24, simply confirms the enormous challenges universities are facing.

“UCU has been saying for years that Scotland’s universities must be properly funded, and that the year-on-year funding cuts are jeopardising jobs, courses and students’ education.”

Meanwhile, Gavin Donoghue, chief executive of Colleges Scotland, said “incredibly stark” report from the SFC highlighted that “most colleges are not financially sustainable within the current level of investment from the Scottish Government”.

He stated: “This is why Colleges Scotland is calling for a step-change in funding at the next Budget.

“Further flat-cash funding, or even just an inflationary uplift, are not sustainable options.”

Higher and further education minister Ben Macpherson stressed that “the Scottish Government recognises the vital role that colleges and universities play in Scotland’s economy and wider society”.

Macpherson said: “We are investing over £1.1bn in teaching and research at Scottish universities as well as providing a 2.6% sector increase in teaching funding to colleges and a 4.9% increase to support college maintenance in 2025-26.

“These reports recognise the high levels of pressures on our colleges and universities which is why we are collaborating closely with the higher and further education sector to ensure a successful and sustainable future.”