Universities in England face a looming funding crisis as a result of a fall in student applications, with some requiring deep cuts to avoid closure, the sector’s regulator has found.
The warning will be issued in the Office for Students’ annual report on the financial health of the sector, which will be published on Thursday morning.
The report, extracts of which have been seen by the Financial Times, finds 40 per cent of England’s universities expect to be in deficit in the 2023-24 academic year, with an “increasing number” showing low levels of cash flow.
“An increasing number of providers will need to make significant changes to their funding model in the near future to avoid facing a material risk of closure,” the report will say.
The findings come as the higher education sector battles with Rishi Sunak’s government over plans to restrict further the number of lucrative international graduate students who come and study in the UK.
The government removed the right of overseas graduate students from bringing family members, and increased the salary threshold for skilled workers from £26,200 to £38,700, contributing to a sharp drop-off in applications.
Last week the head of the Russell Group of top-tier universities warned any further reduction in overseas recruitment would lead to a “significant destabilisation of the sector, [and] result in less spending in local communities, fewer opportunities for domestic students and less UK research”.
The OFS annual statement notes a sharp deterioration in the financial outlook for the sector compared to last year’s report, which said “overall we are not currently concerned about the short-term viability of most providers”.
The report also finds current data on student applications indicates numbers have declined this year, which it said “contrasts starkly” with earlier aggregate forecasts that there would be a 35 per cent increase in international students and a 24 per cent rise in domestic ones.
The report will say: “Data on undergraduate applications and student sponsor visa applications indicates that there has been an overall decline in student entrance this year, including a significant decline in international students.”
More than 50 UK universities are making budget and job cuts as a result of the growing financial pressures caused by the drop-off in overseas students, and a decade-long freeze in the annual £9,250 tuition fees paid by domestic students.
The Russell Group of elite institutions estimates universities are losing £2,500 a year on average per student, a figure that is set to rise to £5,000 by the end of the decade.
The OFS said it was “concerned” about the decision some universities were making in response to mounting financial risk. “Across the sector as a whole this may over time reduce student choice: in some subject areas, or in some regions, or for some types of students,” it added.
Earlier this week the government’s independent adviser on migration concluded a 14-week investigation into the UK’s visa graduate programme with the finding that it was not being abused, and should remain in place.
Still, the government has indicated it is considering further restricting the route, because it believes too many overseas students are applying to lower-ranked universities.
Professor Brian Bell, chair of the Migration Advisory Committee, told MPs there was limited “compelling evidence” that the graduate route was essential to raise the skills level of the UK’s domestic workforce, but remains vital for universities’ finances.
The department for education did not immediately reply to a request for comment.
(Financial Times)
