Many UK universities are set to report ¡°exceptionally large¡± deficits in their 2018-19 accounts owing to the impact of a recovery plan for the Universities Superannuation Scheme pension fund, with Newcastle University having already?posted a ?44 million deficit.

The big deficits will come because the 2018-19 accounts include the impact of a USS recovery plan agreed following the scheme¡¯s March 2017 valuation, which has a significant negative effect on member institutions¡¯ financial results.

But a subsequent recovery plan, agreed following the March 2018 valuation, will have a much smaller effect on institutions¡¯ financial results.

The 2019-20 accounts will include the impact of the second recovery plan, so are thus likely to reverse the negative effect seen in 2018-19.

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Many 2018-19 accounts are likely to be published shortly, coming in the midst of the midst of the University and College Union¡¯s strike over the USS and pay. The USS mainly covers staff in pre-92 universities.

Guidance circulated within the sector by the British Universities Finance Directors Group says that the USS liability will cause ¡°many universities to post exceptionally large deficits for the year¡±.?

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It adds: ¡°These large university deficits are not a reflection of the cash or day-to-day spending position of universities, nor do they mean that spending has been significantly higher than income. They are a reflection of accounting for the increase in USS pension liabilities. These liabilities are future commitments to pay down the deficit, not current expenditure.¡±

The BUFDG guidance continues: ¡°Without these one-off large accounting charges the vast majority of universities would report a surplus for the year as well as positive cash inflows from their operating activities.¡±

Bob Rabone, a former chair of BUFDG, said that ¡°other things being equal in 2020, the latest USS deficit recovery plan will show a positive impact, more than reversing the 2019 impact¡±. This was something of a ¡°rollercoaster¡± and the 2019 impact was an ¡°oddity¡±, he added.

However, Mr Rabone, a former University of Sheffield finance director who is now a consulting fellow at higher education management consultancy Halpin, also warned that ¡°the balance sheet impact of the varying provision cannot simply be ignored and will need careful interpretation each year by lenders and others¡±.

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Newcastle has published its , one of only two Russell Group universities that have done so to date. The accounts show a ?44.4 million deficit, compared with an ?18.4 million surplus the previous year.

If the revised USS contributions agreed following the March 2018 valuation had been finalised in the 2018-19 year, ¡°the net charge for the year would have been ?52.5 million lower at ?27.7 million¡±, the accounts state.

This shows that ¡°the financial sustainability of our pension schemes remains a key financial risk for us¡±, the Newcastle accounts add. ¡°Nevertheless, the underlying cash trading position is strong and we have confidence for the short to medium term.¡±

The University of Salford¡¯s accounts, set to be published this week, will show a ?28.9 million deficit, compared with a ?7.2 million surplus the previous year.

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¡°Subsequent to the year end the USS March 2018 valuation has been finalised and this would reduce the USS liability by ?20 million to ?27.6 million,¡± the accounts state.

A UCU spokesman said: ¡°While we will see very different figures year on year because of the recovery plans, the main point here is that the figures are so variable depending upon what date is chosen and what methodology used. This of course then has a huge real impact on university finances.

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¡°One of the reasons UCU members are currently taking strike over USS is to deliver a better system so a we have a more stable methodology going forward which will benefit universities as well as members.¡±

john.morgan@timeshighereducation.com