Our total expenditure in 2018–19 was £1,129.6 million. This includes an increase of £118.6 million in the USS pension provision which is discussed further in the Expenditure on staff section below.
The underlying growth in expenditure, excluding the pension provision, is 6.8% (£64.2 million).
Expenditure on staff
Staff costs, including the pension provision, make up 58% of our total expenditure this year. This drops to 53% if the increase in the pension provision is removed and brings the ratio of staff costs to total expenditure into line with the last five years.
The USS pension scheme is currently in deficit.The scheme rules require members to contribute to a deficit recovery plan to help bridge this gap. The accounting standards require members to recognise the total remaining cost of this commitment as a provision in their accounts each year-end. Year-on-year underlying staff costs, excluding the pension provision increase, have increased by £34.3 million (6.8%) to £536.7 million. This was due in equal measure to both salary and headcount increases.
In terms of salary cost, the pay award the College implemented in 2018–19 was again higher than the 2% national award. We also made targeted increases to the starting salaries of all academic and research grades. Further details on salaries are contained in the Principles of Remuneration section.
We had an additional 260 full-time equivalent (FTE) members of staff (3.4% increase) at the end of July 2019 compared to July 2018. In contrast, numbers had stayed broadly flat in the previous three years. The total comprises both internally and externally funded staff.
The latter dropped by 40 FTEs year-on-year meaning there was a net increase in the number of staff funded directly by the College of 300 FTEs. This means the percentage of our staff costs funded by external sources dropped from 41% to 38% in 2018–19. This places greater strain
on our resources and will be monitored carefully going forwards.
Some of the growth in FTEs has been targeted at specific new initiatives. For example, 60 of the 300 FTEs were hired to help deliver our ambitious Learning and Teaching strategy. The decision to repatriate the technology transfer office from a third party (IP Group) has added a further 24 FTEs to the College’s internally funded payroll, but we believe this will improve our control over the translation of our work and enable our academics to access with a wider range of investors.
However, we are alert to the risk of incremental growth in internally-funded staff numbers, especially as the majority of the increases are not in academic staff, which is why we are addressing the efficiency of our support processes as a matter of urgency.
Expenditure on non-staff costs
Our other operating expenses increased by £18.8 million (5.3%) to £376.4 million.
Our Chemistry department moved into the recently opened Molecular Sciences Research Hub in White City this year, providing additional space and flexible infrastructure to realise the potential for major advances in chemical and molecular sciences. Increasing the space we occupy, especially at a time when our utility costs are rising anyway, has naturally added to our running costs and overall our premises-related expenditure grew £7.1 million this year.
We spent an additional £3.5 million supporting students through bursaries and scholarships, some of which was funded by research grants and contracts. This represented a 7.1% increase compared to last year and underlines our commitment to supporting students from all socio-economic backgrounds.
The other significant increase was in ICT (£3.6 million), which is attributed to several major projects including upgrading our connection to the Joint Academic Network to give us the fastest internet connection of any UK institution and relocating further activity to the data centre in Slough to improve IT resilience and release space on our South Kensington Campus.
Depreciation increased by £11.1 million, with over half of this increase attributed to the opening of the Molecular Sciences Research Hub mentioned above. The other significant contributor to the increase is the building housing the Dyson School of Design Engineering which opened in May 2018, as this was the first full financial year it was in operation.
Interest and other finance costs have remained similar to prior years as no new debt was secured this year and 96% of our debt is on fixed interest rates.
Total cost by category (£ million)
This chart shows Imperial’s total costs by category in pounds. The total costs shown is £1,073.8 million – this figure excludes the pension provision, and includes the surplus required to fund future commitments and the College’s capital programme. Our costs include:
- Academic departments: £325.5 million (30% of costs)
This category includes delivery and support of research-led student learning and teaching and student research projects. Includes academic and support staff salary costs and resources.
- IT, library and academic services: £59.2 million (6% of costs)
This category includes IT expenditure, library and e-learning resources provided by the College.
- Student support: £29.7 million (3% of costs)
This category includes counselling services, careers advice, external examiner fees and health services.
- Scholarships and bursaries: £41.9 million (4% of costs)
- Estate: £135.3 million (13% of costs)
This category includes the cost of maintaining and running College buildings, student teaching spaces, research laboratories, student support premises and sports buildings.
- Running the university: £88.9 million (8% of costs)
This category includes the cost of running the College and central functions like admissions, finance, human resources, public relations and administrative systems.
- Direct research expenditure: £287.1 million (27% of costs)
- Residences, catering, conferences: £45.3 million (5% of costs)
- Surplus for reinvestment: £61.3 million (6% of costs)
Cash movements
Cash from operating activities fell by £33.5 million to £78.4 million. This reflects the growth in spend, particularly staff costs, outstripping the growth in income.
Favourable working capital movements have helped mitigate what would have been a higher reduction by contributing £15 million overall, with the net amount of pre-funding we receive from research partners increasing by £18 million.
Although we broadly maintained the level of investment in our infrastructure, our net investing activities were lower by £38 million this year. This was partly due to the property sales that are detailed in the other gains and losses section below and also a result of the disposal of £38 million in investments managed by our external fund managers.
The cash outflow from financing activities was slightly higher in 2018–19 than the prior year as we started repayments on a recent amortising loan. Overall though, the level of cash and cash equivalents at the end of the year was slightly higher than in the prior year despite the reduction in the level of cash from operations.
Cash movement
This table shows the cash movements in the financial years 2018–19 and 2017–18 in pounds, including cash and cash equivalents at the beginning and end of the year; cash inflow from operating activities; financing and investing activities; and exchange gains and losses non cash and cash equivalents.
Capital programme
The College invested £178.8 million on fixed assets in 2018–19, continuing its significant investment into its infrastructure. Internally funded spend has reduced over the past five years as we complete the current phase of our capital programme, which included the major investment at White City.
Significant capital projects completed in 2018–19 included the second phase of the refurbishment of the former Post Office building at the South Kensington Campus, for use by the Dyson School of Design Engineering. The 34-storey residential tower at the White City Campus was due to be completed in January 2019.
A major flood two months prior to this has pushed the project back by about a year. Despite this setback, demand has been strong for 59 key-worker apartments set aside for the Imperial academic community.
The Sir Michael Uren Biomedical Engineering Research Hub is due to complete in January 2020, at a cost of £126 million, providing laboratory and office space for interdisciplinary, translational research initiatives at the interface of biomedical sciences and engineering. Construction continued during 2018–19 on our latest hall of residence, which will deliver 729 student bed spaces and 85 residential apartments at North Acton. This project is due to complete in July 2020
Other gains and losses
The £3.4 million gain on disposal of non-currents assets is a combination of gains from sale of properties offset against the deconsolidation of the College’s students’ union. The material movements are detailed below.
The largest gain on a property sale was £7.9 million which arose from the disposal of a commercial research building on the Babrahams Research Campus in Cambridge. The total construction cost was £13.5 million and it was sold, fully tenanted, for £20.9 million in March 2019. The Endowment’s property portfolio made gains of £2.9 million from the sale of properties. This is part of their strategy to realign the portfolio to focus on assets close to our existing estates in London.
Up until 23 November 2018 the College’s students’ union results were consolidated. Its constitution was changed to give it more control over their day-to-day activities with the College no longer able to change the Union’s bye-laws. This triggered a review which concluded that it was no longer appropriate to consolidate its results, aligning its status with the majority of students’ unions within the sector. This resulted in a loss on disposal of non-current assets of £7.6 million.
The £15.5 million gain on investments is a combination of gains and losses, with the material movements highlighted. There was a gain for the Endowment’s externally managed investments (£22.9 million) and a gain for one of our properties that has been reclassified as an investment property.
This was triggered by a school entering into a lease to use it, and it is now held at market value instead of cost (£22.2 million gain). This was offset by a loss in the College’s holding in IP Group plc, driven by a 40% share price reduction during the year (£30.4 million).
The £1.9 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.