Plans to invest almost ?5 billion annually in English university estates may be thrown into jeopardy by a Brexit-related squeeze on borrowing, a report suggests.

Despite having ploughed about ?40 billion into improving their estates over the past 15 years, English universities are set to accelerate their capital expenditure over the next three years, with some ?14.6 billion due to be spent on infrastructure between 2017-18 and 2019-20, says the analysis by the Higher Education Funding Council for England.

Much of this expenditure will be financed by new borrowing, with institutions forecast to take at least an additional ?2.8 billion in borrowing by the end of 2019-20, says the , ¡°Borrowing in the Hefce-funded HE sector¡±, published last month.

That will push the sector¡¯s overall borrowing to ?11.7 billion by the end of this period, which would represent about 35 per cent of the sector¡¯s annual income, the paper says.

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Although the availability of finance ¡°has not been an issue for the higher education sector over recent years¡±, says the study, this could change because of ¡°uncertainty around specific developments which might, directly or indirectly, affect the sector such as changing higher education policy, funding arrangements and Brexit¡±.

Seven UK institutions, including the University of Liverpool, the University of Leeds and the University of Southampton, had their credit ratings downgraded in the wake of the European Union referendum verdict, which ¡°could have implications for the price and availability of future borrowings across the sector¡±, the report says.

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Although this downgrade by Moody¡¯s in September is ¡°not expected [to] impact on existing borrowing at these institutions¡­it could have implications for the price and availability of future borrowing across the sector¡±, the report says.

Any restrictions on access to funding from the European Investment Bank ¨C described as an ¡°important option as a lender¡± in recent years ¨C could be particularly bad news for UK universities, the Hefce report suggests.

Aside from the bond markets, which lent about ?800 million to universities in 2015-16 and 2016-17, the EIB was the biggest lender to UK universities, awarding just over ?300 million in loans over this period.

Although the EIB has yet to announce if its policy on lending to UK institutions will change in the period before the UK leaves the European Union in 2019, the Hefce report remarks that ¡°the EIB are taking a much more cautious approach to new borrowing proposals from the UK¡±. Funding from the EIB for non-EU nations is possible but is ¡°much more limited¡±, the report adds.

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Loans from the EIB have been crucial for several landmark university projects in recent years, including a 25-year, ?60 million loan to Swansea University in 2016 to upgrade its campuses.

Access to EIB loans is particularly critical for less selective universities, the report notes, because ¡°high tariff institutions are those which have been most able to commit to private and public bond arrangements¡±.

Expected rises in the Bank of England¡¯s base interest rate may also ¡°influence the sector¡¯s borrowing appetite and capital infrastructure strategies over the forecast period¡±, the report adds.

jack.grove@timeshighereducation.com