Britain (Commonwealth)_
In recent weeks, the financial crisis brewing within the UK’s higher education sector has manifested into reality, with several universities grappling with severe budgetary shortfalls. Coventry University, for instance, has unveiled plans to implement £95 million in funding cuts over the next two years after uncovering an £85 million deficit in its budget. Simultaneously, Sheffield Hallam University has extended voluntary redundancy invitations to its 1,700 academic staff members, and the University of Aberdeen is considering discontinuing single honour degrees in modern languages due to insufficient income to cover staffing costs.
The dire financial straits facing universities can be attributed to a confluence of factors, including frozen tuition fees, escalating inflation, dwindling international student numbers, and substantial staff pension obligations. Nick Hillman, Director of the Higher Education Policy Institute, warns of a looming wave of job losses across the nation’s universities, marking the most challenging outlook since the 1980s.
Vivienne Stern, Chief Executive of Universities UK (UUK), representing 142 universities, notes that almost every institution is implementing some form of cost-cutting measures, with job losses being a significant component. This follows a trend set by institutions like Brighton University, which earlier this year made the decision to reduce more than 100 academic staff, including forced redundancies.
In addition to personnel reductions and course discontinuations, universities are deferring investments, increasing class sizes, and even selling assets such as land and artwork to maintain financial sustainability. David Maguire, Vice Chancellor at the University of East Anglia, asserts that the current business model for universities is unsustainable and predicts a necessary sector-wide overhaul for survival. Some universities may even consider transitioning to online-only teaching models for select courses.
One primary catalyst for the financial strain is the freeze on tuition fees at £9,250 since 2017, coupled with soaring inflation and rising wages. Universities now face a funding shortfall of £2,500 per English undergraduate student, a figure projected to double to £5,000 by 2030. The demands on universities have intensified, with students requiring more mental health, career, and financial support, especially in the face of escalating rents.
International students, who once served as a crucial revenue stream for universities, are also presenting challenges. Tuition fees from foreign students constituted 13% of university income in 2016, a figure that has since risen to 19%. However, changes to immigration rules, effective January, mean that international students can no longer bring dependents on their visa unless enrolled in a postgraduate research program. This alteration has already dissuaded prospective applicants, with a 40% year-on-year decline in the January 2024 intake of Nigerian students, according to QS Quacquarelli Symonds.
Compounding the financial pressure is the review of the graduate route, which currently allows overseas students to work in the UK for two years after completing their studies, or three years for PhD students. The uncertainty surrounding this pathway is deterring international applicants, creating further concerns for universities.
Universities are also contending with significant pension challenges, particularly those tied to the Teachers’ Pension Scheme. The employer contribution rate on this scheme is set to increase by five percentage points in April, reaching nearly 29%, posing an additional financial burden that universities will need to shoulder.
Despite the escalating crisis, both the Conservative and Labour parties have remained notably reticent on the issue of university finances. Former universities minister Jo Johnson’s proposal to allow universities to raise fees in line with inflation based on performance ratings has gained little traction. Observers believe that neither Keir Starmer nor Rishi Sunak is currently inclined to advocate for higher fees before a general election.
As the sector faces unprecedented challenges, it appears that universities will need to chart a path toward financial sustainability independently. The gravity of the situation, as articulated by Maguire, necessitates a collective willingness within the sector to contemplate and implement unconventional solutions in order to weather the storm.
