The Scottish Funding Council (SFC) has today (26 September 2025) published two reports that provide an aggregate picture of the financial health of Scotland’s colleges and universities.

Based on their annual accounts for academic years 2022-23 and 2023-24 and latest forecasts up to 2027-28 for colleges and 2026-27 for universities, the reports provide detailed information at sector level on the operating position, cash balances, sources of income, expenditure, liquidity, cash flow, borrowing and capital expenditure.

Both colleges and universities continue to operate in an extremely tight fiscal environment, with downward trends in cash balances showing both sectors under pressure.

While neither sector is homogeneous, and the forecasts represent a snapshot in time, both colleges and universities face similar risks to their financial health, including:

• Increasing staff costs.
• Further flat cash settlements or unanticipated public spending cuts.
• An uncertain macro-economic outlook, including rising inflation and persistently high interest rates.
• Continuing high energy costs.
• Infrastructure pressures, exacerbated by the impact of RAAC, impacting on the delivery of high-quality learning, teaching and research.
• The requirement to invest in the achievement of public sector net zero targets.
• The impact of UK government policies on maintaining international fee income.

The reports also outline the mitigating actions that colleges and universities are taking to adapt to challenges and uncertainties, including staff restructuring, vacancy management, freezing of non-essential spend, reviewing course portfolios, curriculum rationalisation and consolidation, moves to online and blended learning, delaying capital spend and reviewing estates strategies.

Commenting on the reports, SFC Chair, Professor Cara Aitchison, said:

“While these reports represent a snapshot in time, 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.

“We are encouraged by the proactive steps being taken by institutions as they adapt and build in resilience for this changing environment, recognising that this may include difficult decisions to secure long term financial sustainability which is a requirement of our Financial Memorandum.

“We continue to engage closely with Scottish Ministers on the case for investment in colleges and universities which are the drivers for economic growth, addressing child poverty, supporting the transition to net zero and delivering excellent public services.

“We are also increasing levels of engagement and monitoring activity for those institutions facing the highest risks to their financial health and are working with them to understand and assess plans to bring them back to a sustainable position.”

Sector Reaction

Gavin Donoghue, CEO of Colleges Scotland, said:

“Today’s report is incredibly stark. The SFC is rightly highlighting that most colleges are not financially sustainable within the current level of investment from the Scottish Government. 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.

“The SFC highlights the imminent risk that a number of colleges may be insolvent by the end of this academic year, without urgent action from Scottish Government. Many colleges are clearly in a perilous financial position, and this must be quickly addressed through a significant increase in core funding.

“The harsh reality is that chronic under-investment over many years in has led to college leaders having to consider deeply unpalatable decisions about courses, campuses, and curriculum, while at the same time people of all ages are increasingly looking for opportunities to upskill and reskill themselves at college, and employers are crying out for a skilled workforce.

“This report makes clear colleges have done absolutely everything they can – including educating 12.4% less students, and reducing staff numbers by 8.7% since 2021 – in an effort to balance the books, but they cannot self-fund any further restructuring activity.

“Colleges are Scotland’s skills engines, and important local community anchors which act as places of hope and opportunity to help move people out of poverty. Scotland’s people need and value colleges, and students who come to college have an overwhelmingly positive experience leading to good jobs and great careers.

“It is now past time for proper investment to come to colleges, so they can continue to deliver world-class education and training to over 218,000 people in Scotland each year.”