Financial review

The University uses Earnings Before Interest, Taxation, Depreciation and Amortisation (EBITDA) as one of our key financial metrics in measuring financial sustainability. University EBITDA in 2024/25 was £96 million. This is an increase of £12 million on the EBITDA reported last year (2024: £84 million). Further detail on income and expenditure follows in the commentary below. The summary table on this page reconciles EBITDA to numbers presented in the statement of comprehensive income and expenditure.

The University’s statement of financial position remains strong with total net assets amounting to £3.1 billion (2024: £3.1 billion).

Scope of the financial statements

These financial statements have been prepared in accordance with the Statement of Recommended Practice Accounting for Further and Higher Education Institutions 2019 (SORP 2019), the Scottish Funding Council’s 2024/25 accounts direction and with Financial Reporting Standard (FRS) 102.

Financial performance

Commentary on financial performance in 2024/25 and comparisons to the prior year exclude the impact of the non-cash credit to staff costs of £352 million that was reported in 2023/24. This related to movement on the USS pension provision in the year and was a result of the University previously holding a provision on its balance sheet for our share of the USS Deficit Recovery Plan. The movement year-on-year (either up or down) does not represent cash moving in or out of the organisation as it is an accounting adjustment. 

FRS 102 requires that unrealised gains and losses on the University's own pension schemes be reported as part of the statement of comprehensive income and expenditure. These gains and losses, which are not realised cash movements, form part of the total comprehensive income for the year of £74 million (2024: £393 million). 

Income

Total income in 2024/25 was £1,477 million (2024: £1,434 million). This represents an increase of three per cent from last year. The largest increases in the year were on tuition fees and other income contributing an additional £52 million income. Research income also grew but all other funding sources had reductions in the year. 

The University has a broad range of income streams and the funding mix remains fairly consistent year-on-year. In total, tuition fees (38 per cent), funding body grants (14 per cent), research income (25 per cent) and other income (18 per cent) account for 95 per cent of the University’s total income. The remaining five per cent relates to investment income, donations and endowments. The notable longer-term trend is an increased income proportion from tuition fees and a reduced share from funding body grants.

Although challenges remain in student recruitment, income from tuition fees and education contracts grew by over five per cent in the year to £557 million (2024: £527 million). Our student headcount is slightly up by 0.3 per cent. Non-EU overseas students grew in number, offsetting reductions across all other domiciles. This small mix change has helped contribute to the growth in income in the year. 

Funding body grants decreased in 2024/25 to £207 million (2024: £209 million). Movements on any specific category of grant funding were small. Recurrent teaching grants dropped by £4 million but this was largely offset by recurrent research grants growing by £3 million. Strategic funding also fell by over £1 million. 

Research income grew by three per cent on the previous year to £375 million (2024: £365 million). The mix of income from funding sources changed in the year with research councils and UK sources growing by over £40 million. This contrasts with a reduction in income from EU and overseas funders that fell by over £20 million. Funding received from the Edinburgh and South East Scotland City Region Deal is nearing an end and reduced to £10 million in the year (2024: £15 million). 

The University’s non-teaching and research income remains an important element of our funding model. Other income in 2024/25 increased by 10 per cent to £261 million (2024: £238 million). Income from our accommodation and catering business was a large driver of this increase, growing to £115 million (2024: £98 million). 

Investment income fell by 16 per cent in 2024/25 to £54 million (2024: £64 million). After several years of growth, interest received on our treasury and cash funds has decreased due to interest rates dropping and our treasury funds reducing across the year. 

Donations and endowments totalled £22 million in 2024/25 (2024: £30 million). This can be a volatile income stream across financial years and the reduction this year follows a large decrease we reported last year. New endowments income did grow versus last year but income from donations was £10 million lower. 

Expenditure

Total expenditure in 2024/25 was £1,457 million (2024: £1,409 million), a three per cent increase on last year. This increase excludes the impact of £352 million non-cash staff costs credit relating to movement on the USS pension provision reported in 2023/24.

Staff costs for the year were £829 million (2024: £756 million), an increase of 10 per cent. Staff costs remain our largest expenditure item and account for a growing share of total expenditure at 57 per cent (2024: 54 per cent).

Salary costs, excluding employer on-costs, increased by 10 per cent in 2024/25. Cost increases resulting from nationally agreed pay awards and staff progressing through pay grade scales largely contributed to the rise. In addition, average staff FTE in the year increased by 1.5 per cent, which equates to circa 200 FTE. Although average FTE for the year increased from prior year, FTE at 31 July 2025 was circa 280 lower than at the start of the year. 

Despite the salary costs increase, pension costs in the year fell to £128 million (2024: £133 million). Driving this was a full year of a lower employer contribution rate on USS and a further saving from a lower contribution rate on Edinburgh University Staff Benefit Scheme (EUSBS) in place since 1 January 2025. 

Social security costs increased significantly in the year, rising 20 percent to £73 million (2024: £61 million). Contributing to this increase was the National Insurance rate and threshold changes introduced from April 2025. 

There was no notable movement in our mix of staff costs across different activities. Academic and teaching departments account for 57 per cent of cost, research grants and contracts 18 per cent and the remaining 25 per cent covers our professional services and commercial staff that provide library, IT, premises and other administrative support. 

In the spring of 2024, the University implemented a revised pay grade scale that adjusted the point at which grades start and end on the national pay spine points. Staff costs in 2024/25 included the impact of a first full year of increased cost resulting from this decision. 

After staff costs, our next largest expenditure item is other operating expenses which significantly reduced by £34 million in the year to £506 million this year (2024: £540 million). 

Other operating expenses includes the costs of supporting our academic and research mission as well as the costs of supporting our students through scholarships and bursaries and accommodation and library services. The cost of supporting our estate, including utility and maintenance costs, and general administrative costs are also included in other operating expenses. 

As a result of our staff costs growing but other operating expenses reducing, they now represent 35 per cent of total expenditure for the year (2024: 38 per cent). 

The reduced other operating expenditure in the year is a reflection of work already undertaken to successfully deliver cost savings initiatives across many areas of the University. 

The University’s depreciation, amortisation and impairment charge increased by 18 per cent to £108 million in 2024/25 (2024: £91 million). Our charge in the year includes circa £50 million for both land and buildings, and fixtures, fittings and equipment. Charge on intangible assets was £3 million and there was a £4 million impairment made to fixed assets in the year. 

Interest and other finance costs were £14 million in 2024/25 (2024: £22 million). This includes the cost of servicing our long-term borrowing (see note 20 to the financial statements) which is being used to help fund our capital investment plans. The reduction in the year is predominantly due to a £7 million reduction in interest costs on pension schemes as a result of the 2023 USS valuation no longer showing a deficit position. 

Update on Pensions

Pension schemes in the UK are required to undertake a formal valuation every three years to establish the scheme’s assets and liabilities. The assets represent investments that are made in order to fund pensions (funded by employer and member contributions) and the liabilities relate to the amounts expected to be paid out to pensioners over time.

The Universities Superannuation Scheme (USS) struck its latest valuation as at 31 March 2023. The 2023 valuation resulted in the scheme moving to a surplus position.

Following the conclusion of the valuation, the University is no longer required to make deficit reduction contributions or hold a balance sheet provision for future deficit reduction payments.

The most recent valuation for our in-house Edinburgh University Staff Benefit Scheme (EUSBS) was as at 31 March 2024 and similar to USS, the scheme has moved from a deficit position at its last valuation to a small surplus position.

An outcome from the valuation is a change to employer and employee contribution rates with both the University and members now contributing to the scheme at a lower rate.

The University has recorded an actuarial gain on its funded pension schemes of £30 million in the year (2024: £13 million loss). Actuarial gains and losses are non-cash movements and are an outcome from changes in the estimated value of the assets and liabilities in the University’s own defined benefit pension scheme. Any gain or loss is not a measure of the University’s operational financial performance. 

Certain assumptions are used to value the future liabilities and assets belonging to each pension scheme. These estimates reflect changes to the actuary’s assumptions as a result of another year’s experience. The actuarial gain of £30 million is broken down as per the table above (see note 33 for further details on the individual pension schemes).

Net Assets

Total net assets are £3.1 billion, having increased by £74 million in the year. The net book value of fixed assets increased by £99 million largely accounting for the increase in total net assets. This is a reflection of the University’s investment in its land and buildings and spend of close to £150 million in the year. Additionally, there was £57 million of spend on fixtures, fittings and equipment.

Endowments

In the year to 31 July 2025, the Endowment and Investment fund unit price grew by 11 per cent. The value of the Endowment and Investment fund grew to £605 million (2024: £580 million). 

The Investment Committee regularly reviews the fund managers and asset categories in the unitised fund to diversify risk while optimising returns. 

All of the University’s fund managers are signatories to the United Nations Principles of Responsible Investment (UNPRI).

More information: Responsible Investment Policy

Treasury and cashflow

The University manages its treasury funds through cash and cash equivalents balances and investments in both current and non-current assets. Management and investment of treasury funds allow the University to generate investment income that contributes to surplus achieved in the year. 

Cash and cash equivalents reduced by £23 million in the year, however total treasury funds have reduced by a greater amount as amounts invested in non-current assets also reduced by £43 million in the year.

Driving the £66 million reduction in total treasury funds was investment in capital expenditure of over £200 million, which exceeded £96 million EBITDA generated in the year. 

The University cash and cash equivalents balance as at 31 July 2025 was £217 million (2024: £240 million) with movements reported in the statement of cash flows presented in the chart below. 

The University is careful to manage its cash balances to ensure it is not in breach of financial covenants with any lenders; and also to ensure adequate resources are available to fund our ongoing obligations and investment plans. 

It should be noted that a substantial amount of our cash and cash equivalents is restricted and must be used under the terms in which we received it. For example, research purposes or donations with specific requirements.

Institutional sustainability

Our financial statements are prepared on a going concern basis, which is an accounting term that means we have the resources to meet our obligations and continue to operate for a period of no less than 12 months from the date of approval of the financial statements. There are many challenges of both a financial and non-financial nature that we and the rest of the higher education sector currently face. Despite these, we remain confident that the University remains a going concern, and work continues to secure ongoing financial sustainability.

Expenditure growth in 2024/25 again outpaced income growth, continuing the trend in recent years. There are many contributing factors, however such a trend is unsustainable over a prolonged period and is why the University is taking action to manage its cost base. We have started on this journey through a voluntary severance scheme that will result in reduced costs from 2025/26 onwards and in the last year our spend on other operating expenditure was notably reduced.

The University’s governing body, the University Court, has comprehensive arrangements in place to monitor, assess and ensure the institution’s on-going financial sustainability. We model various impact scenarios on the University’s financial position with a focus on existing and emerging risks and opportunities to test the University’s financial strength. Through careful management of our cost base and risks faced we are confident we will remain a going concern, meet our short and longer-term commitments and financially support strategic objectives set. 

Outlook

Financial year 2024/25 has been another challenging year for the University and the sector. EBITDA achieved was below our key metric target and surplus before other gains and losses reduced. 

Without further management of our cost base, this position is forecast to worsen in 2025/26 as a result of the continuing impact of inflation, annual pay award and changes to pay scale implemented in 2024. It is for this reason that the University is actively and constructively addressing our cost base and has set financial budgets that grow our surplus and an outcome where growth in expenditure no longer exceeds growth in income.

The University faces a significant financial challenge, but through actions already taken and plans for the future, we are well placed to respond to these challenges through the next financial year and beyond.

19 December 2025