Sussex’s £3 million frozen in Iceland
The University of Sussex had £3 million frozen last week as news emerged that the University is one of the twelve UK establishments with money invested in one of the collapsed Icelandic banks.
The University has money invested on a short-term deposit – just over 10% of its present short-term deposits – with a UK based bank called Heritable, which is owned by the Icelandic bank Landsbanki. This investment of surplus money is part of normal business at universities who often spread their investments among different financial institutions. At present it is not certain whether the money will be returned as the bank’s administrators may succeed in repaying all or part of customers’ deposits – a process that will take a substantial amount of time.
The collapse of the Icelandic banking system is the latest in a long line of international financial turmoil, such as the problems with Northern Rock in 2007 and the closing of the Lehman Brothers bank in America earlier this year. The UK has been hugely affected by Iceland’s banking system collapse and at the moment there is nearly £1 billion of British money frozen in Icelandic banks. The £3 million belonging to the University of Sussex that is at risk would be enough money to pay off the debts of 250 graduates.
Councils, hospitals and charities have also been affected by Iceland’s financial breakdown, as well as shops such as French Connection, Woolworths and Debenhams. West Sussex County Council also had £12.9 million invested.
On October 7 the Icelandic Financial Supervisory Authority took control of Landsbanki after it had lost a significant amount of money, and as a result all of its customers’ accounts were frozen. Glitnir and Kaupthing are two other banks in financial trouble. Gordon Brown has assured that “everything
in our power” is being done to get the money returned, and a loan of £100 million was given by the Bank of England to Landsbanki in an attempt to help resolve its financial situation and maximize the money returned to UK creditors.
The University of Sussex is one of twelve universities that have had assets affected by recent events. Other universities include Durham, Exeter, Cambridge, Manchester Metropolitan and Oxford. Oxford stands to lose up to £30 million, with Cambridge looking at a loss of £11 million and Manchester Metropolitan University also losing a considerable sum of £10 million. Between the universities a total of £77 million is at stake. Despite these significant losses it is said that no university is at risk as a result of its involvement with Icelandic banks.
A spokesman for The Higher Education Funding Council for England (HEFCE) said “We know that a small number of higher education institutions are affected, but the overall sum is not substantial when compared with their total investments.” HEFCE representatives are on standby to offer their expertise to any institution that may need them. The University of Sussex support this claim and Deputy Vice-Chancellor, Professor Paul Layzell, has said that, “This does not affect the day-to-day running of the University. It does not affect our services to students, jobs at the University or payments to suppliers.” Everyone, students and businesses, can have the same confidence in the university as before. The situation is also being closely monitored by the Universities UK (UUK) and the matter has been presented to the Department for Innovation, Universities and Skills. The University is taking action working with officials from the HM treasury and the HEFCE to resolve the issue, “to ensure the interests of Sussex are properly represented to the Government,” explains a University representative.
Despite reassurance from the University and the HEFCE, the loss is significant. With the current economic
downturn and an expected million-pound raise in utility costs next year, the potential loss of £3 million is a substantial one.