SCOTTISH universities have warned that they won’t know the full economic impact of the Covid-19 crisis until overseas students “turn up or don’t” in September.

The alarm comes as a new report from the Scottish Parliament Information Centre (SPICe), indicates that the coronavirus pandemic “will have an impact on universities for the foreseeable future” despite some campuses being able to begin re-opening a few days ago.

The industry is expected to lose around £72 million from the last academic year, according to the Scottish Funding Council (SFC), but a deficit of up to £500 million could face Scottish universities in the 202/21 year – with much of the loss due to the lack of overseas fee-paying students attending from September.

The Institute for Fiscal Studies (IFS) has estimated that Scottish universities could lose as much as £1.1bn in the long run, and the impact on the UK-wide sector could be anywhere between £3 billion and £19 billion.

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The SFC indicates that in an optimistic scenario with the number of new international students cut in half and a 30 per cent reduction of international students continuing studies, “the projected collective operating deficit is £383.5 million”.

But a more pessimistic scenario where no new international students are able to attend Scottish universities from September, “the collective operating deficit is £651 million”. A total of 18 Scottish universities are expected to report budget deficits in the 2020/21 academic year.

The SPICe research indicated that as the new academic year approaches in September, “the sector will face new and considerable financial challenges, adding to existing pressures”.

It adds: “A fall in international student numbers is expected to be one of the main drivers behind the fall in income. This is of particular concern given tuition fees make up the largest proportion of sector income at 32 per cent and within that, international student fees make up 57 per cent of tuition fee income .

“However, the latest UCAS applicant figures up to June 30 show a 16 per cent rise in international applicants to Scottish universities and final entrant figures will not be known until the new academic year starts in September. "It is therefore difficult to know at this stage how much income will be lost.”

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Scottish universities have an income of almost £4 billion a year - with around half from the Scottish and UK Governments. Around £1 billion is tallied up in fees from non-EU students and from other parts of the UK.

Alastair Sim, director of Universities Scotland, said: "The report is absolutely right to say that Scottish universities face a considerable financial challenge as a result of Covid-19. Even the most optimistic estimate puts losses at over £300 million in the next academic year so the stakes are very high indeed.

"The report rightly highlights that tuition fees, and particularly fees from international students, are the largest source of income for universities and recognises that a fall, of any size, in the number of students coming to Scotland will have a serious impact on university finances.”

He added: “We’re months into this crisis but the reality is that universities won’t know the impact on demand until students turn up – or don’t. Recent applicant data has been a cause for cautious optimism within the sector, in that applications are better than originally feared, when it comes to international students these figures are partial and only indicative.”

Universities have been propped up by £75 million of Scottish Government funding for research, while the UK Government announced a UK-wide £280 million research and innovation pot of cash, alongside grant funding and low interest loans.

The Scottish Government has also announced that free tuition fees for non-UK EU students will be ended after the 2020/21 academic year – with Universities Minister Richard Lochhead stressing that the estimated £19 million that would have funded new EU students studying in Scotland will instead be used to fund places for Scottish students.

Mr Sim added: “We’re grateful for the support packages already offered by the Scottish and UK Governments which will go some way to protect university research and innovation. That support is positive recognition that research and innovation will have a key role in the recovery.

“However, the pandemic has also been hugely disruptive to the many sources of income that underpin teaching in our universities.

“It’s that teaching which contributes the skills and knowledge needed for the post-pandemic economy so we’re concerned that this remains on the agenda and we move into next academic year – which is when the financial pressures will be felt most acutely by universities.”

Some Scottish universities are more reliant than others on international students as a key part of their business model. Before the Covid-19 crisis hit, Heriot-Watt University has around 300 Chinese students and also has campuses in Dubai and Malaysia.

Some institutions were facing financial constraints before the Covid-19 pandemic arrived, with SFC funding having reduced by seven per cent, or £91 million, in real terms between 2014-15 and 2017-18.

Mr Lochhead has previously warned that Scottish universities must change their financial model and "become much more resilient" warning that "there's hard lessons to learn".

He added: “We have to find a way of tapping into the global reputation our institutions have – our universities are respected throughout the world and understandably, we have capitilised on that as a nation.

“We do have to look at have a much more resilient financial model and we have to look at how overall, our colleges and universities can be better protected from these global events in the future."