Aberystwyth University has posted a £2.5m deficit for 2022/23, fresh accounts show, due to “lower than budgeted for student numbers, inflationary pressures and interest rate rises.”

Last year, Aberystwyth University posted a £0.2m surplus, the first time the institution had been in the black since 2013/14.

That report, amid rising student numbers and research funding, led to optimism about the future following the Covid-19 pandemic, but a cost-of-living crisis, rising inflation, and several rounds of pay awards have led to further financial challenges.

However, a new multi-million pound deficit has “increased pressure” on the university, the accounts report said.

“Expenditure has remained largely consistent with previous years in most operational areas, matching increased income in areas with improved performance,” the report said.

“However, large variances in staff costs, debt service, utilities and consumables in areas impacted by inflation have been recognised, leading to the reporting of the deficit.

“The challenging financial environment has increased pressure on the university cash flow and short-term funds management.”

The report outlines that income, research funding and domestic and international student numbers all increased during the last financial year, and that restructuring exercises in previous years had “lowered the university’s cost base.”

“Whilst those changes have enabled Aberystwyth to operate with more flexibility and to focus resources strategically, in 2022-23 these gains were more than offset by cost pressures in other areas,” the report said.

While student numbers for both UK and international undergraduates rose from the previous year – bringing in an extra £2.8m – the increase was lower than the university had expected.

Former vice-chancellor Elizabeth Treasure, who retired earlier this year, said: “Before the economic challenges we faced last year, Aberystwyth University had been making strong progress in rebuilding its financial health.

“We reported our first operating surplus, excluding the movement in pension schemes, since 2013/14 in the last academic year.

“However, the sheer scale of inflationary cost increases during this year has set new challenges at a level that we could not have foreseen.”

In his foreword to the accounts, outgoing chair of Aberystwyth University Council Dr Emyr Roberts said: “The university has been steered through some unprecedented challenges, whether the Covid-19 pandemic or the harsh economic conditions that continue to affect us all.

“It is down to the hard work of my fellow council members, the Vice-Chancellor, and the staff of this university that we have weathered these storms.

“This strength of character, which has always been part of this institution’s history, coupled with the positive development of the university in recent years are a source of great pride and give me confidence for the future.”