Universities fighting for their future must be bold and must be fast

Financial pressures have been ramping up in the higher education sector. In May, the Office for Students (OfS) warned that universities were too reliant on anticipated growth of both UK-based and international students. Without this growth, we forecast that a substantial number of institutions would be in deficit.

In light of this growing risk, we have updated our analysis to account for the latest student recruitment picture, the impact of an increase in tuition fees from next year, and a rise in National Insurance contributions for employers. 

The data confirms that many universities and colleges have been too optimistic in their recruitment projections and there is a real risk that some will run into serious financial trouble in the coming years. 

Unless they act boldly, our modelling suggests that nearly three quarters (72 per cent) of higher education institutions will be in deficit by 2025-26, and 40 per cent would face low liquidity.

The number of international students has fallen sharply this year, with 16 per cent fewer visa applications. Some nations that have historically sent thousands of students to the UK – Nigeria, Bangladesh, and India to name a few – have seen dramatic decreases.

With many universities relying on fee income from international students to sustain teaching, research, and support for students, rapid and decisive action is necessary.

Our modelling is based on data submitted to the OfS in late 2023, and so cannot take account of updated recruitment projections, or the steps institutions have taken to address financial risks this year.

But even with that important caveat, the situation is challenging and becoming ever more so. 

We know that many universities have already made changes to secure their long-term future, making difficult but necessary decisions about the size and shape of their institutions. Recent changes made by universities are not yet captured in our analysis.

Some are working with other institutions, centralising support services or considering more radical steps such as mergers.

Others are facing hard choices to close courses and make other cost savings. As they do that, they need to continue to protect the quality of the education they provide and look after the interests of their students. And where universities do run into trouble, we are ready to work with them on solutions that will make sure students are supported as far as possible. 

Universities and colleges are autonomous institutions, responsible for deciding how best to reshape their provision to secure their financial health into the long term. But one thing is clear, the time for bold and transformative action is here.