Scotland’s colleges recorded a combined deficit of £5.6 million in 2024-25, up from £1.9 million the previous year.
The figures were reported by BBC Scotland following a new Audit Scotland report into the financial position of the country’s further education sector.
The deficit marks the third consecutive year that Scotland’s colleges have recorded an overall shortfall, with rising staff and energy costs said to be outpacing funding increases.
BBC Scotland reported that real-terms funding for colleges had fallen by more than 7% in the five years to 2026-27. Although the Scottish Government increased resource funding for colleges by more than 9% in 2026-27, Audit Scotland said it remained unclear whether that uplift would be sufficient or sustained enough to support the reform needed across the sector.
The Scottish Funding Council increased cash advances to colleges from £5.4 million in 2023-24 to £13.9 million in 2024-25 as financial pressures intensified.
Eleven of Scotland’s 19 colleges recorded a deficit in 2024-25, compared with eight the previous year. Four colleges reported deficits of £1 million or more, while 10 saw a deterioration in their financial performance.
More than half of colleges were assessed as facing either high or very high financial risk. Eight were classified as financially at very high risk, with another six assessed as high risk.
Colleges have sought to reduce costs by cutting staff numbers, with the workforce falling by more than 11% over two years to 12,575 in 2024-25.
Voluntary severance schemes cost colleges £7.2 million during the year. However, staff costs continued to rise and accounted for 67% of overall college expenditure.
Auditor General for Scotland Stephen Boyle told the BBC: “The financial pressure on Scotland’s colleges is increasing.”
He said the sector needed urgent reform if it was to continue delivering for students and employers. Speaking to BBC Radio Scotland, Mr Boyle said that although funding had risen by 9.3%, it remained 7.5% lower in real terms over five years.
He also highlighted a fall of 40,000 students attending colleges over the past two years, which he said had significantly affected college income.
Audit Scotland said recommendations made a year ago to the Scottish Government, the Scottish Funding Council and colleges remained at an early stage of implementation.
Gavin Donoghue, chief executive of Colleges Scotland, told BBC Scotland: “This is a clear sign of a sector still under considerable financial pressure.”
He warned that declining student numbers could have wider consequences for Scotland’s economy, given the role colleges play in supporting employers, communities and workforce skills.
GMB Scotland said the findings represented another warning over college funding, while Scottish Labour claimed the figures demonstrated the impact of cuts on the sector.
Tertiary Education Minister Alyn Smith told the BBC that the Scottish Government recognised the challenges facing colleges.
He said the college budget had increased by 10% this year and that ministers were working with the Scottish Funding Council and colleges on measures aimed at improving financial sustainability, operational flexibility and long-term investment.
The findings come as work continues on the Scottish Government’s College Sector of the Future programme, which aims to create a more sustainable, resilient and future-focused college system.
