Our total expenditure in 2017–18 was £944.1 million, up 3.9% from last year.
Our staff costs are our largest, at 53% of total spend, and most important item of expenditure. Failure to retain staff is one of the key risks that we are addressing in terms of both likelihood and impact.
In recent years there has been targeted staff investment in key strategic areas – enriching the student experience, building stronger relationships with alumni and friends and strengthening collaboration with partners. For example, the Advancement team has grown by the equivalent of 50 full-time members of staff in recent years and, as demonstrated above, is starting to make a material difference to the College’s revenue diversification efforts.
Academic and research staff numbers stayed flat this year. Despite growth in academic staff numbers in key areas with, for example, the completion of the Dyson School of Design Engineering and new hires in anticipation of the Michael Uren Biomedical Engineering Research Hub being completed in 2019, these increases have been offset slightly by reductions in Chemistry, as activity levels dropped in the course of the Department’s move to its new White City home in the Molecular Sciences Research Hub.
Other operating costs increased by £13.8 million (4.0%) to £357.6 million. The College aims to selectively manage its spend with external suppliers to ensure that there are no real term increases. This is challenging given the uncertain external environment and in particular sterling’s decline since the referendum.
The College’s procurement strategy divides its supply chain by procurement category and complexity. This enables both strategic suppliers and the ‘long tail’ of lower volume and value suppliers to be actively managed and the targeting of resources to capture opportunity and leverage scale. In 2017–18 several new agreements have been established which has enabled the College to meet its £10 million procurement saving target for the year, up from a successfully met £7.5 million saving target in 2016–17.
Although no new debt was raised in the year, interest and other finance costs increased by 9.1% as the full-year impact of the additional drawdowns in the previous year kicked in.
Other gains and losses
There has been a £6.0 million loss on investments this year, comprising a £19.9 million gain from marketable investments, offset by a £17.1 million loss in market value in the College’s investment property portfolio as the Central London property market continued to soften, and a £8.8 million drop in value of the College’s shareholding in IP Group plc.
This is the first year in which the market value of the shareholding has impacted the College’s net comprehensive income, as prior to IP Group’s acquisition of Touchstone Innovations in October 2017 the College’s equity interest in the latter was treated as an associate. In comparison, last year’s surplus benefitted from £10.8 million gain from asset disposals and £15.0 million from market gains on investments.
Another key risk for the College is an inability to provide appropriate infrastructure to support our academic mission and our position as one of the world’s great science and technology-focused universities.
In partial mitigation of this risk, the College incurred costs of £186.6 million on fixed assets this financial year, down from £210.3 million last year. This compares well with our immediate peers in the UK, though less well with our global peers, especially in the United States.
Significant capital projects that were completed in 2017–18 include: the Molecular Sciences Research Hub at the White City Campus, at a total estimated cost of £165.2 million; the City and Guilds Building at the South Kensington Campus, a new home for the Departments of Aeronautics and Mechanical Engineering, completed in January 2018 at an estimated total cost of £89.6 million; the initial phase of the refurbishment of the former Post Office building at the South Kensington Campus, for use by the Dyson School of Design Engineering, with a second phase due for completion in March 2019, at an estimated total cost of purchase and refurbishment of £56.8 million.
Major capital projects currently under construction include a residential tower and the Michael Uren Biomedical Engineering Research Hub, both at the White City Campus, due for completion in January and September 2019 respectively. The residential tower will deliver 192 residential units, of which 59 will be key worker units reserved for College staff.