If you were in any doubt about the financial challenges facing higher education, then the latest report from the Office for Students, published on 15 November, certainly lays them bare. It revealed that 72% of universities in England could face deficits by 2025-26 with the combination of high inflation, stagnant fees and falling student numbers creating a perfect storm. 

Instead of respite, the Autumn Budget further compounded their woes, with the sector now bracing for the impact of rising staffing costs due to a hike in employer insurance that is predicted to increase staffing costs for universities by £372m a year. This poses a serious threat not only to higher education, but also to the wider economy and UK business, the Office for Students warns. 

“We had hoped that the erosion of the undergraduate fee would be resolved,” says Sarah Randall-Paley, Director of Finance at Lancaster University. “In common with many other universities, we are looking at finding savings to compensate, including voluntary severance schemes to try and reshape ourselves for what looks to be the funding model and the student appetite model for the future. That’s a challenge.”

Fortunately, Randall-Paley is no stranger to managing uncertainty, having been in Lancaster’s financial hot seat during the pandemic. As the full scale of the impact of COVID-19 emerged, she was also Chair of the British University Finance Directors’ Group – the representative body for higher education finance staff in the UK – a position she held for four years from 2018.

Despite the obvious competitive pressures at play, cross-sector collaboration was to prove pivotal in helping universities weather the storm. “You saw the power of a body like that, working with government, the Office for Students, the banks and others to understand what was going on and how best we could support members,” Randall-Paley says. It was her leadership during that extraordinary time that led to her being awarded an MBE in last year’s King’s Birthday Honours List

Having joined Lancaster University from KPMG in 1995, Randall-Paley will this year celebrate her 30-year work anniversary. She admits the original lure of the job was that it would allow her and her husband to relocate from London and she had no expectation of where the job would lead. 

The university had just won a prestigious Queen’s Anniversary Prize for a technology project for disabled students. “It chimed better with the values that I had than working in a very heavy, corporate London-focused business,” she says. 

Today it’s sustainability that sits high on the list of Randall-Paley’s personal values. She has been a driving force behind the university’s £60m sustainability-linked revolving credit facility from Santander, which provides the cash reserves required to meet its operational costs and funds to draw on to help it achieve its sustainability targets.

The five-year funding arrangement enables the university to provide funds each year to support one or more students from a low-income background undertaking a sustainability-focused project.

A portion of the commitment fee it pays on the loan is aligned to its success in achieving a range of sustainability targets. If it meets its targets, the university qualifies for a reduction in the sustainability-linked portion of the commitment fee rate on its loan and pays the discounted sum into a separate fund to support the agreed project.

If it fails to achieve its targets, the sustainability-linked portion of the commitment fee will be increased and the university will donate this sum to the student project instead rather than paying it to Santander UK.

As part of the funding agreement, the performance against five sustainability targets is measured and evaluated every year by independent third-party organisations. July 2026 targets include a 40% reduction in carbon emissions generated by its buildings; increasing the number of female professors to reach or exceed the top 40% for UK universities; and improving the ethnic diversity of its professional services staff to achieve an ethnic mix that reflects that of Lancaster.

A boost in on-campus-generated renewable electricity (another of its sustainability targets) from Lancaster’s existing wind turbine is being supplemented by a 16.5MW solar farm currently under construction, with hopes to add a second wind turbine to its campus in the next few years. 

“Our aim is to drive positive change against each of those measures, things that would genuinely benefit society. The targets are supposed to be stretching. To be frank, you wouldn’t do it for the financial benefit, but it’s self-fulfilling and self-enriching and I’m quite proud of it,” Randall-Paley says.

As sustainability ramps up both corporate and personal agendas, demonstrating commitment has become a “hygiene” factor, she says. 

“Some of the leading environmental scientists in Europe are based on the campus. It’s important to them that our students are increasingly focused on sustainability and applicants, too,” says Randall-Paley. A director of the Pentland Centre for Sustainability in Business at Lancaster University, Jan Bebbington, sits on ICAEW’s sustainability committee.

As the impact of the pandemic continues to work its way through the system, the university landscape has been forced to evolve from its pre-COVID state. Technology has certainly facilitated flexible approaches to learning for students. Although it’s not without its downsides, not least in terms of interaction, it has allowed great collaboration between Lancaster’s campuses around the world. 

The university has overseas arrangements in Malaysia, China, Ghana and Germany, and is in the process of setting up an operation in Indonesia. Randall-Payne concludes: “We’ve been particularly outwardly focused to raise our brand in those areas and to take Lancaster’s operation to areas where people might not be able to afford to travel overseas.”