GUCU Finance Briefing Nov 2020

The main narrative that has been used by SMT to justify the accelerated implementation of a rebranded “Evolving Goldsmiths” is that of financial unsustainability and an impending lack of liquidity. Members have expressed their fears that Goldsmiths is one step away from being declared non-viable or being brought under special measures by the Office for Students. It is imperative therefore that we add some clarity to the situation, distinguishing what are “forecasts” and “assumptions” from hard data and separating the one-off situation resulting from the Covid-19 crisis, from more structural problems. 

Over the last five years, Goldsmiths has grown strongly both in terms of recruitment and market share. This gave SMT the confidence to draw up budgets based on ambitious income targets which, unfortunately, we have not consistently been able to meet. Caution about these targets came too late and the subsequent shortfall was wrapped in a narrative that laid the blame squarely at academic staff’s feet. Hence, in the financial year (FY) 2018, our deficit was £3.8 million, lowering to £2.8 million in FY 2019. While the definitive accounts for the FY 2020 have not yet been released, we have been quoted a figure of £14.2 million deficit. 

Under normal circumstances, this would signal an unequivocal crisis. However, much of this deficit can be understood as directly related to Covid-19 and not illustrative of our structural financial health. Indeed, according to the documentation provided by SMT, all things being equal, our underlying deficit would have been £1.9 million this year. This points to an ongoing, if shrinking, negative discrepancy between income and expenditure that needs to be urgently addressed, but one that does not merit an accelerated and substantial restructure without a detailed and adequately paced bottom-up consultation, much less one that is led by an external financial consultancy with no relevant knowledge or experience in the Higher Education sector. 

In the October reforecast shared by SMT the only major threat to the immediate viability of Goldsmiths is the possibility of breaching a loan covenant in April 2021 by £6.4 million, a threat that, if likely, we would need to take seriously as it would demand the immediate repayment of our loans. However, the figures that we have seen and the way that figures are evolving make this a diminishing horizon. Most importantly, the October re-forecast projects a shortfall in fees income of £10.67 million from the budgeted targets, a drop of 10.7%. However, a quick glance at the latest recruitment snapshots does not point to such a steep fall in income despite the predictable drop in overseas recruitment. Previous attrition figures in 2019-20 for example, were as high as 3.5% (2.5% is a more historical figure), some of which can reasonably be attributed to the combination of the strikes and Covid-19. In what we consider a (perhaps rightly) overcautious calculation, a projection for an attrition of 6% has been made for this year. This however, has so far failed to materialise. £2.4 million losses are linked to this projection. Considered alongside other cautious allowances made for one-off Covid-related support and complaints (£1 million), bad debts (an additional £1.8 million), residence income loss (£2.4 million) and importantly an additional £1 million set aside for staff restructuring (adding up to a total of £2 million in FY22), the risk of breaching our covenant or not being able to negotiate a smaller breach seems slimmer. It is also worth mentioning that in the middle of this crisis, SMT has invested or is planning to spend £0.8 million in consultancy fees directly stemming from the IBR and the portfolio review. 

A bridging loan might be inevitable to move us towards recovery, but there are “self-help” options that can make the ask smaller and avoid binding us to destructive financial conditions designed to eliminate the lender’s risk, and not to secure the future of Goldsmiths. Unlike many other universities we own land and properties that can provide liquidity at relatively short notice, and we think that a plan for disposing of these assets should have already been put into place. This could secure £7.1 million and was one of the recommendations in the IBR. Additionally, KPMG recommended a cancellation of non-critical maintenance expenditure that would allow for £1 million savings in FY21. We also support the additional suggestion by KPMG to cancel the Enterprise Hub, allowing for eventual overall savings of £8.8 million. We have been assured that the decision to halt the enterprise Hub until April 2022 has already been made, a decision that we welcome. The continuation of the VSS scheme could also provide further savings. 

We believe that we can have a different kind of process that engages in a less destructive process of rethinking our portfolio, one that is not informed by panic nor by the belief that we are a “failing” institution. We have been alarmed by the lack of understanding of the Goldsmiths brand shown by the current SMT. Both GUCU and many other stakeholders have been asking repeatedly for a more bottom-up consultation that would allow us to bring to light many of the values (both financial and otherwise) that we attach to the College. The SMT, however, has been singularly incapable of listening or engaging its stakeholders, turning what could have been a process of concerted transition into a full-blown crisis, including an unprecedented vote of no confidence. 

Metrics that reflect a very distorted image of what the college offers (including the use of the widely discredited Guardian league table) and the costs that particular departments incur in (through an inappropriate use of activity-based costings) have been used to justify the closure of courses with little or no consultation. But moreover, there is a lack of vision for what Goldsmiths can become, systematically undervaluing what we have, in favour of a version of Goldsmiths that few of us can recognise. Research in particular has been side-lined and an industry-led dogma looks to be imposed in all departments, however ill-fitting this might be. The proposed strategy dismisses much of what we value about Goldsmiths, imposing devastating and short-sighted cuts that we might never recover from, especially when it is undertaken with so little knowledge or feel for what happens at ground level. A plan to bring Goldsmiths back into the profitability it has briefly lost and to recover from the one-off crisis brought on by Covid-19, should make the most of our value, our reputation, our collective knowledge and our will to move towards an institution that recognises us all.