How is Umeå University affected by rising inflation and interest rates

In my role as Deputy University Director and budget director, it is important to look at the greater picture in terms of the entire economy of the university, and not just costs of premises. The diagram below shows how the university's costs for 2021 were distributed:

We are estimating that rental costs for premises, including energy costs, will increase by 7–8 per cent in 2023 compared to 2022. But our starting position is good since the index for internal rent for 2023 has already been adjusted by 3.5 per cent. The remaining portion of the cost increase will be managed by a certain surplus in internal rent from this year. Consequently, the internal rent that has already been set for 2023 will continue to apply – internal rent will increase by 1.9 per cent compared to this year.

You may have already learnt that staff and payroll costs are not affected in the short term by rising inflation since there is a signed agreement until 30 September 2023.

For other running costs, however, inflation often leads to cost increases as some suppliers are demanding to increase their prices. We assess that we can cover these cost increases within the scope of our current resources for 2022 and 2023 including available agency capital.

So far, we see no signs of direct government funding or revenue from allowances and assignments for 2023 being affected by rising inflation.

I have also investigated how increased interest rates affect the economy of the university. And in that respect, the current situation has positive effects on the university since we have more funds available through agency capital and unused grants than the funds we loan for investments. This means an increased net revenue by SEK 18 million per year for each percentage point the national central bank, the Swedish Riksbank, increases its policy rate.

All in all, Umeå University has a strong economy and a capacity to tackle this financially strenous period well. After discussions in the University Management, the University Management Council including deans among others, and the University Board, our joint assessment is that the university will cope well with rising inflation and increased interest rates without any changes to the already established budget for 2023.

The university should, to the highest extent possible, continue to annually use available resources to conduct high-quality education and research. Hence, it is important that managers at the university do not take precautionary measures due to high inflation.