Publication: Scotland's colleges 2020

Full effects of pandemic still to be felt by colleges

Scotland's colleges play a vital role in helping people learn new skills and fulfil their potential. Colleges also make significant contributions in supporting the country’s social and economic recovery from Covid-19 - but college audits for 2019-20 show that many continue to face significant financial challenges.

As we reported pre-pandemic, colleges were facing rising cost pressures - particularly around staffing and maintaining their buildings. Most institutions were forecasting future deficits while also trying to increase the proportion of students completing their courses.

Then Covid-19 changed the way learning is delivered. Teaching moved largely online and campuses closed - hitting revenue streams further.

Students have had to adapt to a new way of learning, which has been particularly difficult for those suffering financial hardship and digital poverty. The Scottish Government responded by providing additional funding to support students. And Education Scotland HM Inspectors will publish a report shortly on how colleges have adapted to digital learning. Covid-19 has also increased the need for colleges to determine what buildings and equipment are needed to deliver future learning.

Overall, the sector has responded well to the challenges of the pandemic so far, with governance and financial management arrangements continuing to operate effectively.

Colleges ended 2019-20 in a better financial position than initially forecast

Significantly, the full financial effects of Covid-19 were not felt during academic year 2019-20. Management teams have been able to furlough staff, which has resulted in some colleges delaying difficult decisions around severance.

Scottish Government funding continues to rise - the sector received over £615 million of revenue funding in financial year 2019/20, a 2% real terms increase. But pre-Covid increases in funding have primarily covered additional costs from harmonising staff terms and conditions.

The gap between colleges' total income and expenditure has grown to £54 million. And it's forecast to continue because of costs outwith the sector's immediate control, such as pensions and depreciation of assets. After stripping out these costs, the sector’s underlying financial position (adjusted operating position) was a surplus of over £3 million in 2019-20 (see here for more detail for each college). This was a far healthier position than the £9 million deficit colleges had forecasted in June 2020. Colleges will provide the Scottish Funding Council (SFC) with updated medium-term financial forecasts in June 2021.