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Universities and colleges that fail to maintain an adequate operating surplus should raise their targets, the funding council announced last week.

At present, the Higher Education Funding Council for England recommends that institutions aim for a 3 per cent operating surplus. However, a pilot study of 19 institutions confirmed that the surplus needed for reinvestment and growth is between 3 and 4 per cent, the chairman of the Hefce board, Sir Michael Checkland, told delegates at the Hefce conference in Birmingham.

Figures published by Hefce in February showed that the sector's operating surplus next year will be just 0.6 per cent of its total income.