Total expenditure in 2019–20 was £961.6 million. This includes a £71.5 million reversal in the USS pension provision; the underlying growth in expenditure in 2019–20, excluding the pension provision, was £20.7 million (2.0%).
This rate of growth in expenditure is much lower than the last five years, which saw an annualised growth of 5.2%. The majority of this is attributed to a fall in non-staff costs as a result of the pandemic. Despite this fall in the rate of growth, the drop in income was such that there was no overall surplus for reinvestment generated in 2019–20, compared to the £63.3 million in the prior year.
Expenditure on staff
Staff costs were £567.4 million for 2019–20 (excluding pension provision), up 5.7% on last year. The increase is due to a combination of an increase in staff numbers, our decision to repeat last year’s above-inflation pay award, and an increased provision for holiday pay.
College has seen a net increase in staff FTEs of 109 (1.4%) from last year, taking our total staff numbers in FTE terms to almost 8,000. The increase was entirely in academic, research and learning and teaching staff, the latter reflecting our current focus on the digital transformation to support our undergraduate and postgraduate teaching. The growth in academic and research staff is intended to support the growth in our student population, plus a large group transferred to the College’s School of Public Health late in the year making up half of the growth.
A subsequent impact of lockdown is that our staff took less time off for annual leave between the start of our leave year in February and the end of July. As a result, we have seen a £5.9 million increase in the value of the accrual relating to unused holiday pay at year-end, representing on average an additional three days leave per employee. This is reported as an administration and central services cost.
A much larger provision adjustment relates to the deficit on the USS pension scheme. Last year we recognised a £117.2 million increase in the cost of this commitment, based on the agreed position at the end of July 2019, which was based on the 2017 valuation. The 2018 valuation was finalised during the latter part of 2019, taking the provision down from £179.9 million to £107.4 million.
Expenditure on non-staff costs
Research funded non-staff costs have fallen year- on-year following the transition to remote working in March for all non-essential related research. Last year finished 23.6% lower than the prior year, with most of decline recognised in the final quarter. Although research was continuing, purchases were delayed as many labs were not operational, and given the logistical challenges of organising deliveries during lockdown.
Expenditure started to increase towards the end of the year as activity on campus began to ramp up. While lockdown has impacted campus activity, staff have been able to continue progressing desk-based research remotely, while some essential research experiments continued on campus. Most research funders were keen to preserve research talent throughout the disruption and agreed that changes to planned work or extensions to project duration were acceptable.
Other operating expenses within academic departments were £7.4 million higher in 2019–20 than in the prior year. This is driven by the transfer of Schistosomiasis Control Initiative (SCI) activity out of the College. SCI is now a separate charity initiative supporting governments in sub-Saharan African countries. The transfer is reported as an expenditure of £16.7 million, with the associated income having been recognised previously. Excluding this, academic department spend would have fallen by £9.3 million during the prior year, reflecting the reduced activity after lockdown.
Our new student records system has been operational since January 2020 and was used for our 2020–21 applicants and now for our students. Prior to this point its accumulated costs were capitalised and will depreciate over the next five years. The costs incurred this year are no longer being capitalised and account for a £3.1 million increase in our administration and services’ running costs year-on-year. In due course, we hope to realise some offsetting savings in academic departments.
We have needed to recognise an increase of £4.1 million to the provision for decommissioning of our engineering facility, partly due to COVID-19 halting work temporarily. An unforeseen volume of radioactive material has further added to these costs. We recommenced work in June 2020 and this is expected to reach completion by April 2021 if no further delays materialise.
We have continued to support our students through bursaries and scholarships by spending a record £53.2 million. As with previous years, some of this has been funded by research grants and contracts. Our spend in this area has increased in each of the last five years, growing on average 3.6% per year.
We are committed to ensuring students from all socio-economic backgrounds have the opportunity to thrive at Imperial. Our Imperial Bursary fund enables donors to support this commitment. We secured £0.4 million this year to help these students and we matched every donation.
This is the first year we are reporting expenditure on our access and participation plan (note 11). The £9.8 million reported includes direct financial support to students and staff to supporting these students to succeed at the College and to progress into employment.
Total cost by category (£ million) 2019–20
Other gains and losses
An overall gain of £60.3 million was recognised in 2019–20 due to a combination of property sales and market movements. The main contributor is the sale of the Medical School Building at St Mary’s Hospital, where we recorded a gain of £70.8 million. The sale will benefit staff by providing them with better facilities for their research and improving their proximity to colleagues in medicine and collaborative disciplines at the Hammersmith and White City Campuses, as well as at South Kensington. This will enhance collaboration and multidisciplinary opportunities.
We recognised an investment gain of £5.4 million on the completion of our 34-storey residential tower, Eighty Eight Wood Lane, at White City. The tower offers a mix of both private residential and key worker accommodation.
This gain was offset by losses within the Endowment following the increase in volatility caused by the economic impact of the response to the pandemic. There was a loss of £2.6 million on our property portfolio and further losses were realised when £17.9 million of equity assets were sold to provide liquidity within the Endowment.
Our £1.0 million share of operating deficit in joint ventures relates to ScaleSpace. The joint venture continued to incur start-up losses as it finished the first phase of its facility, more details of which are below. The £1.2 million deficit in associate relates to the College’s share of the operational loss reported this year by TWIG, a company that leverages an online platform providing resources to primary schools.
We continue to invest in our infrastructure, spending £138.8 million on additions to fixed assets in 2019–20. This was £40 million lower than last year. Some of the spend was delayed due to COVID-19 related restrictions. While much of the work has since resumed and all major projects completed, around £20 million of expenditure has been deferred into next year.
Our White City South masterplan, a 240,000 sqm application to develop the 14-acre site located south of the Westway on Wood Lane, was unanimously approved by the London Borough of Hammersmith and Fulham in September 2019. ScaleSpace is our first development on this. A joint venture with Blenheim Chalcot, a digital venture builder, ScaleSpace is a new 200,000 square foot facility for the scale-up community. It will help the UK’s scale-up sector overcome growth challenges and secure the right support at the right time to grow. The first tenants from across the technology, digital and life-sciences sectors took up residence in September 2020.
The Sir Michael Uren Hub achieved practical completion in December 2019. The 13-storey building, costing £127 million, houses interdisciplinary research initiatives from across our faculties.
It will drive clinical translation through integrated clinical and imaging facilities. The building was made possible by a £40 million gift from alumnus Sir Michael Uren OBE and his Foundation – the most generous donation in our history.
Cash and cashflow
Cash from operating activities improved by £11.3 million this year to £89.7 million. Favourable working capital movements of £37.3 million boosted this figure, mostly related to the net amount of pre-funding we received from research partners (£27.1 million) as cash continued to be forwarded by funders.
Overall, our net investing activities are £15.6 million lower than the prior year, with the sales proceeds from asset sales offsetting the investment in new assets to a significant extent.
The cash outflow from financing activities was slightly higher than last year. This is due to lower inflows from new endowments which are volatile in nature. Overall, the level of cash and cash equivalents at the end of the year was around £25 million higher than in the prior year.
When it became clear that COVID-19 was going to have a major impact on College operations, our immediate priority was to ensure we had sufficient liquidity to cope with the uncertainty.
The sale of the Medical School building at St Mary’s at the end of April generated £84 million, taking our cash balance over £300 million. To ensure we had sufficient liquidity to navigate our way through even our most adverse scenarios, we applied successfully to join the Bank of England’s Covid Corporate Financing Facility.
This gives us access to up to a further £500 million, the final drawdown date currently March 2021. We are entering into a revolving credit facility to provide additional liquidity past the closure of the Covid Corporate Financing Facility. We have focused even more rigorously than usual on our working capital position over the last few months and have seen debtors fall and creditors rise, which has been a major contributor to the favourable cash generation in 2019–20.
While we appreciate being able to continue to benefit from this, we recognise we cannot assume this will always be the case. These measures have helped us to conclude that we remain a going concern. Further details of this assessment are in the Basis of preparation section of the Accounting policies note.