More than half of Scotland's universities spent more money than they brought in during the 24/25 academic year, according to a new report.

The Scottish Funding Council, the body that allocates public money to higher education, found that 10 universities were in deficit and predicts it will be the same in the coming year, despite more funding.

It warns that the situation could get worse if expected income from international students does not arrive, describing some forecasts as "optimistic".

The report said that three of Scotland's "ancient" universities – Edinburgh, Glasgow and St Andrews - recorded the largest surpluses and it was the more modern universities that were often in deficit.

Older universities tend to have more reserves, assets, endowments and cash which could be drawn on at times of crisis, albeit with a bigger cost base to cover.

They also raise 75% of all university research income in the country.

The newer, post-1992 institutions are typically more exposed to fluctuations in income streams from international students and a long-term proportionate drop in public funding.

The report said all the universities recorded an overall surplus of £90.6m, which was an improvement on the previous year's £15.8m.

However, that falls to a deficit of £7m for the rest of the sector, when the universities of Edinburgh, Glasgow and St Andrews are removed, revealing the acute struggles which more modern universities have experienced recently in Scotland.

The annual Financial Sustainability of Universities report did not include the University of Dundee - which had to be bailed out by the Scottish government after a collapse in its finances - as its accounts were not finalised.

Overall, Heriot-Watt University declared the biggest operating deficit in Scotland, at £9.88m.

The University of Strathclyde recorded a deficit of £9.5m and the University of the West of Scotland spent £8.88m more than it earned.

Glasgow Caledonian University, whose lecturers and staff have come together for an unprecedented joint strike against job cuts, was the only one of seven "modern" universities that delivered a surplus in 24/25.

However, the university has said it is worried about its long-term financial security and is facing a £10m deficit in the next academic year.

As well as the report into universities, the Scottish Funding Council also released an annual report into the financial health of the college sector.

It carried a stark warning that "insolvency remains an imminent risk" and that most colleges were not financially sustainable despite increased funding for the current year.

It says 17 colleges expect deficits for the academic year which ended in July.

Only three colleges have forecast a break-even position.

Paul Devoy, interim chief executive of the Scottish Funding Council (SFC), said Scotland's colleges and universities were operating in one of the most challenging financial environments the sector had faced for many years.

"These reports shine a clear light on the scale of that pressure, drawing on detailed analysis of accounts and forecasts. They are a snapshot in time, but an important one," he said.

"SFC is working closely and actively with colleges and universities across Scotland to understand the pressures they face, strengthen financial resilience and support their short-term viability and long-term sustainability."

Universities Scotland director Claire McPherson said the report shone a light on the steps that institutions were taking to improve their financial situations.

"However, the missing context from the report is the systematic and significant reduction in funding the sector has received from the Scottish government over the last decade," she said.

"Universities have had to make difficult decisions in a challenging financial climate, but they have done that whilst also facing real-time funding cuts to their central financial settlement from the Scottish government.

"The evidence is now clear. Without action, the financial pressures facing universities will continue to intensify."

Gavin Donoghue, chief executive of Colleges Scotland, said the report highlighted that funding for colleges was 7.5% lower in real terms now than in 2021.

He said colleges had done everything possible to balance their budgets, but they could not continue to absorb current rising costs, or adapt for the future, without additional support.

The Scottish government's Tertiary Education minister Alyn Smith said he recognised the challenges highlighted in both reports.

Smith said ministers were working closely with universities and colleges to develop a more sustainable and resilient model.

Last month, a landmark report from Universities Scotland and the Scottish government declared there was a "funding gap" of £200m each year in Scotland, due to several factors.

It spotlighted an increasing dependence on fee-paying international students to cross-subsidise the tuition of Scottish undergraduates.

However, a decline in those coming from abroad to study in Scotland, combined with a reduction in public funding, rising inflation and high energy prices have jeopardised the financial health of Scotland's higher education institutions in recent years.

The financial crisis has hit across the board.

Earlier this month, academic staff at Edinburgh and Dundee universities commenced strike action for five weeks in protest at staffing cuts and potential compulsory redundancies.

In spring, staff at Aberdeen, Strathclyde and Heriot Watt universities also took industrial action, whilst 2025 saw strikes at other institutions including the West of Scotland and Robert Gordon University.

The SFC report predicts a 25% reduction in the overall surplus next year, to £67.9m, however, this figure includes the "optimistic" forecast on an increase in international students.

It said there was "significant uncertainty" and "volatility" over foreign student numbers and income which meant there was a real risk that predicted future financial deficits could worsen as circumstances changed.

The funding council has highlighted a concern about "flat cash" funding for the sector - meaning the same money as last year with no inflationary uplift - from the upcoming Scottish government budget.

It states that this would "increase operating deficits, reduce cash balances and heighten reliance on already substantially restricted reserves".

The report goes on to explain that this would increase the "need for efficiency measures…such as voluntary severance schemes while constraining investment in strategic priorities and capital projects".

This will be seen as a warning to ministers that more troubles will lie ahead, should the sector not see an increase in government grants.

Inflation, industrial action and uncertainty around UK government policy are also highlighted as factors which could threaten financial health at Scottish institutions.

Other factors influencing potential future income instability include reduced research grants and investment income along with increased staff costs due to "pay pressures".

Seventeen of Scotland's higher education institutions are included in the report, with Dundee University and the Open University omitted.