Faced with steady cost pressures and limited prospects for higher public funding, universities are looking to manage risks and generate income – but this is easier said than done.
Some 168 institutions from 34 countries have responded to a European University Association (EUA) survey, which sought to provide a general update on the state of university finances in Europe, as well as their future.
While diving into “Sense & sustainability: future paths for university finances” at the EUA’s recent funding forum at the University of Helsinki in Finland, we had the opportunity to preview some of our initial findings.
When asked about how their income has evolved over the past five years, Europe’s universities report growing core public funding. This is good news and is connected to a pre-pandemic phenomenon of ‘catching-up’ in parts of Europe and boosted funding as part of national recovery and resilience plans agreed at European level in 2021.
However, universities are much less confident that this trend will continue in the next five years. A majority of respondents to our survey expect a decrease or stable public funding in all its forms for the coming period.
Reliance on public funding
On average, nearly three quarters of European universities’ budgets stem from public funding, whether basic, competitive or international (chiefly, European Union). Student fees (home and international) make up less than 15% of the average income structure, followed by a host of different sources, including business contracts, service income and philanthropy, among others.
Naturally, this structure differs among specific institutional profiles (comprehensive universities, universities of applied sciences, etc) and when differentiating public and private providers.
Interestingly, this overall picture does not differ much from an earlier EUA study, published 14 years ago, despite income diversification being flagged as a priority at the time.
One possible explanation for this is a lack of time and resources. In a crisis-ridden context, it is difficult for universities to adequately invest in building up the capacities needed to develop and sustain new income streams.
Nevertheless, having experienced a global pandemic, inflation and an energy crisis, as well as having to adjust to geopolitical tensions and shifting demographics, universities are keen on mitigating risks. Diversification of the student population is a recurrent goal. However, international students’ mobility has become increasingly vulnerable to disruptions caused by global phenomena, such as public health crises, conflicts, natural disasters, etc.
Notably, many universities’ strategies in this area extend to broadening the types of students they cater to in general, enhancing lifelong learning and online teaching offers.
Needless to say, such plans need to involve significant rethinking and upscaling of the university’s offer, in terms of academic provision, in-house skills and IT and real estate infrastructure. This has been identified by some countries in their national recovery and resilience plans as part of NextGenerationEU, the implementation of which is still underway.
Significant investment in these areas exists and must be acknowledged but addressing the twin digital and green transitions remains a challenge for universities. The future-proofing of universities deserves a more in-depth reflection at the level of funding models, which increasingly address short- to medium-term issues in a fragmented fashion.
European Union funding
In this configuration, many are acknowledging European Union funding as a demanding, but familiar, source of much-needed funding, especially for research. The stakes are high: even though, on average, EU funding accounted for around 5% of a university’s income, some institutions rely on it for up to one-fifth of their revenue, notably through European structural and investment funds.
The sector’s sights are without a doubt set on the EU. Funding programmes managed by the European Union, such as Erasmus+ and Horizon Europe, are the source that institutions most often expect to grow. And universities are gearing up for this, for example, through awareness-raising, support to staff applying for funds, pre- and post-award services and bringing together dispersed support functions in the institution.
The strategies are manifold. The high prestige that comes with European Research Council grants makes those a rather frequent priority, but there is growing understanding that participating in the different opportunities offered by EU programmes can bring multiple benefits and acts as a lever to build new income-generating partnerships.
European Universities Initiative
However, it is not all the ‘same old story’ with European funding. There is a new kid on the block: the alliances under the European Universities Initiative (EUI). As the scheme grows, incorporating more higher education providers across the continent, universities are gradually anchoring their EU funding strategy into their respective alliance. They plan project proposals with consortium partners and bring internal structures closer together to develop synergies.
This does not come without tensions and heightens the seemingly never-ending competitive cycles that universities continuously experience. Not only do they have to accommodate and find resources for mismatched project cycles that come with different requirements, while achieving ambitious institutional goals; they also have to pull together income streams to support the alliance’s activities.
Co-funding is an integral part of the deal; however, the playing field is far from level. There is a lot of diversity in the support brought by national public authorities to participating institutions, and staff at the core of the initiative are now confronted with the issue of turning the alliance into a flow of activities over the long term.
‘Close to distress’
While surveyed universities displayed varying degrees of cost awareness, many were those which expressed something close to distress when considering the sustainability of it all.
Much remains to be explored, but one thing is already sure: building resilience through diversification is no easy feat, and this effort requires staff professionalisation and investment in expert profiles, as well as a strong focus on leadership development.
The latter is the cornerstone of institutional transformation. University leadership teams, in the widest meaning of the term, must acquire the necessary skills and competences to drive forward their institution’s financial sustainability.
Enora Bennetot Pruvot is deputy director of governance, funding and public policy development at the European University Association (EUA). This article is based on her presentation at the 2024 EUA Funding Forum which took place at the University of Helsinki in Finland on 3-4 October 2024. The results of the survey mentioned in this article will be further detailed in a forthcoming series of EUA briefings.
This article is a commentary. Commentary articles are the opinion of the author and do not necessarily reflect the views of University World News.
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