70% of UK universities face losses amid declining student recruitment: report

By Minh Nga   November 18, 2024 | 08:04 pm PT
70% of UK universities face losses amid declining student recruitment: report
A group of students on their graduation day at King's College, Cambridge, the U.K. in 2022. Photo by Unsplash/Chris Boland
Nearly three-quarters of U.K. universities face financial challenges as lower-than-expected domestic and international student enrollment strain their budgets despite tuition fee increases.

According to the Office for Students (OfS), a non-departmental public body under the U.K. Department for Education, the financial outlook for English higher education institutions is bleak.

Many universities are projected to fall into deficit by next year despite the planned rise in tuition fees.

The shortfall is attributed to lower-than-expected student recruitment both domestically and internationally, according to a new report by the Office for Students (OfS), the regulator and competition authority for the higher education sector. The report revises its financial sustainability analysis following an uneven recruitment season.

While the overall number of student acceptances increased by 1.3% from 2023 to 2024, this was far below the anticipated 5.8% growth. Around 100 institutions fell short of domestic recruitment targets, while 150 missed international student enrollment goals.

Recruitment of international students has decreased significantly overall, with 16% fewer applications for visas in 2024 than in 2023.

The number of international students from certain countries that send significant numbers to study in the U.K. has decreased, some by more than 40%.

"Our analysis of recruitment trends suggested that providers' financial forecasts were based on predictions of student recruitment that were too optimistic. The report set out the impact of modeled scenarios of alternative, less positive, recruitment outcomes. These suggested that the actual outturn position in the short and medium term was likely to be even more challenging than that implied by the sector’s forecasts for 2024-25," says the OfS report published on Nov. 15.

It suggests that "without mitigating action," nearly three quarters, or 72%, of higher education providers could be in deficit by 2025-26, and 40% would have fewer than 30 days' liquidity.

In specific, the sector is expected to experience a £3.4 billion (US$4.3 million) shortfall in net income by 2025-26, resulting in a £1.6 billion deficit.

The forecast serves as an update to the OfS's annual financial sustainability report released in May. The update is made based on the latest available data trends for the recruitment of U.K. and international students for entry in autumn 2024.

It follows the announcement by the Education Secretary at the beginning this month that tuition fees in England will increase from £9,250 to £9,535 per year next year to "ensure the future of higher education."

However, according to the OfS, despite the increase in tuition fees, the first in eight years, the additional £371 million this generates is unlikely to cover rising costs.

It said employer national insurance hikes alone are projected to add £430 million annually to universities’ financial burdens, negating any gains from the fee hike.

OfS Chief Executive Susan Lapworth said the updated analysis underscores the severe financial challenges facing universities.

Lapworth noted that institutions are working to address these risks but warned that "a competitive recruitment market for U.K. students means some universities will lose out and will need to update their plans."

"And all institutions will be alive to the impact of a sharp reduction in visa applications for international student," she said.

Speaking to The Pie News, Tim Bradshaw, chief executive of the Russell Group, stated that its member institutions have been actively implementing efficiency measures and taking steps to mitigate challenges.

"The OfS report is based on modeling and indicates what could happen without the sort of mitigations that are already being implemented," he said.

"While the report clearly shows the number of institutions that could be at risk if they aren't able to deliver on their plans for change, a wider concern is what this might mean for the government's ambitions for opportunity and economic growth."

He acknowledged the government's recent decision to slightly increase tuition fees in England from the 2025-26 academic year as a "good start," but emphasized the necessity for a comprehensive, long-term funding and policy framework to ensure the financial sustainability of higher education institutions.

 
 
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