The Open University plays a unique role in higher education. Our model of supported open learning has created opportunities for millions of people to learn new knowledge and skills, overcome disadvantage and achieve success in their personal and career goals, often while working and bringing up a family.
We provide among the most affordable higher education in the sector, with the flexibility to study anywhere and at any time. But we are now feeling the pressure of the worsening economic environment. Inflation is driving up our costs while the cost-of-living crisis is having an impact on demand for our courses. The Office for Budget Responsibility has predicted the biggest fall in living standards on record in the UK, and we expect this to have a continuing impact on studying with the OU, given many of our students are having to prioritise essential spending and work.
Given the weak economic outlook and in anticipation of our student population falling back to the levels we had prior to the pandemic, it is necessary to adjust our spending in line with our expected income. We will do this over four years so that we do not compromise our mission or future growth opportunities. We will use our reserves to support our expenditure while we identify and implement measures to reduce spending and increase income.
We are fortunate that our financial reserves enable us to act over time to mitigate these challenges. But we cannot run down our reserves to such an extent that we are unable to cope with future challenges or invest in our future development. We estimate that we need to achieve a correction in our annual operating budget of around 16% over the next four years through a combination of cost reductions and new net income. This means that there are difficult decisions ahead for us, at a time when our staff and their families will also be feeling the effects of inflation, and the ways in which we work in many areas will need to change.
We are committed to transparency about the challenges we face as we work together with our staff, trade unions and Students’ Association on our plans to return to an operating surplus. We hope to be able to avoid compulsory staff redundancies. Depending on how the situation develops, we will be considering all options in deciding on what is best for the University, our staff and the communities we serve. We are committed to continuing to invest in our students’ success and an experience that is consistently ranked as one of the best in the UK.
