Hundreds of thousands of teenagers across the UK are preparing to receive their A-level results this August, a rite of passage for many. However, this year, the students won’t be the only ones feeling anxious as they open their envelopes and emails. With the university sector facing a funding crisis, scores of vice-chancellors are also on edge, as these results determine the path into higher education for most students.
Years of underfunding have significantly weakened the finances of the sector, raising concerns that a shortage of student numbers could have disastrous consequences for the most vulnerable institutions. Across the UK, universities are cutting jobs and closing departments, with discussions of potential closures and mergers for struggling institutions. The gravity of the situation is reflected in the fact that university collapses are now featured on the new government’s list of potential crises.
The financial strain on universities is a result of long-term underfunding and short-term changes to visa regulations for overseas students, upon whom they have come to rely. The largest single source of income for higher education is tuition fees, contributing almost £27bn in 2022-23, more than the total from grants, research funding, and other income combined. However, fees for domestic students have been capped at £9,250 per year since 2017, and have only risen once since they were tripled to £9,000 by the coalition government in 2012. Adjusted for inflation, fees should be at £12,560 this year, meaning that in real terms, they have fallen by 30%. This has resulted in UK students not covering the cost of their education, a situation that most institutional leaders believe is unsustainable.
To make up for this gap, universities have turned their focus to overseas students, who can pay between £12,000 and £50,000 for their education. Over the last five years, the sector’s reliance on this income has grown. Data from the Higher Education Statistics Agency shows that in 2018-19, overseas students made up 20% of the student body and contributed 37% of the fees income, which amounts to around £7.2bn. By last year, the overseas population had grown to 26%, contributing 46% of the fees income, around £11.7bn. There has also been a change in the countries from which students come, with a decrease in students from EU countries and an increase in students from India and Nigeria.
However, last year, the Conservative government took steps to reduce the flow of overseas students, motivated by concerns about net migration figures rather than higher education. This includes a ban on overseas students bringing dependents, resulting in a decrease in monthly visa applications. The government also announced a review of the graduate route that allows students to work for two years post-study, and increased the salary threshold for spouses moving to the UK to £38,700. While the new government has promised to review these measures, universities have already felt the effects, with a decrease in foreign student applications estimated at almost 175,000 this year.
Anecdotally, universities have reported a significant decline in interest from both overseas and domestic potential applicants. This makes the clearing season crucial, as institutions under strain compete to attract students. This may result in lower offers being made to students, which may be good news for some as grades are expected to be corrected from inflated COVID levels. Additionally, incentives, such as the competition to win a year’s free accommodation offered by one college, may be offered. However, the financial reality for universities is no joke.
Currently, there are half a dozen billion-pound universities in the UK, with Oxford leading the pack with an income of almost £3bn last year. However, these institutions are the exception among the more than 400 universities in the UK. According to Universities UK, one in four of its 130 members has recorded a budget deficit for at least two consecutive years. Even the Russell Group, which consists of 24 self-appointed “leading universities,” has more courses available in clearing than usual. This puts pressure on all institutions to attract students and the fees that come with them, regardless of how inadequate they may be.
