English universities are exposed to financial risk due to their reliance on income from international students, a new report from MPs has warned.
The Committee of Public Accounts examined the financial sustainability of the higher education sector in England, concluding that there are “systemic, long-term pressures” which could harm student experience.
In the report, published on June 15, the committee said it is unconvinced that the Office for Students, a regulator sponsored by the Department for Education, is capable of dealing with these issues.
Publicly-funded teaching and research is currently being subsidised, primarily by fees from overseas students – meaning financial sustainability is dependent on the continued growth of incoming international student numbers.
Universities UK gave evidence to the committee that this income stream could come under pressure from an “overreliance on certain countries that may leave UK universities vulnerable to competition and concerns about global affairs”.
The Department for Education said that it was encouraging universities to diversify the countries from which they recruit, and has identified five priority markets: Indonesia, Nigeria, Saudi Arabia, Vietnam and India.
It also said that it recognised the competitive nature of the global market but that, among its main competitors, the UK was the only country that significantly grew its international student recruitment during the pandemic.
MP Meg Hillier, chair of the committee, said in a statement that “too many providers are too heavily dependent on overseas student fees to maintain their finances, research base and provision – that is not a satisfactory situation in a sector that government is leaning on to boost the nation’s notoriously, persistently low productivity”.
Data seen by the committee showed that the number of higher education providers who spent more than they collected in fees in a given year increased to 32% in 2019-20 from 5% in 2015-16.
The report pointed to financial pressures including rising energy costs (which impact research-heavy institutions), increasing pension costs, and the tuition fee cap freeze.
A spokesperson from the Russell Group, which represents 24 of the UK’s research universities, told The PIE that rising costs mean that deficits “for domestic undergraduate teaching are set to widen significantly across all subjects”.
“That is why we are calling on Government to work with the sector to develop a new sustainable funding formula that delivers value for students and the taxpayer,” the spokesperson said.
“This risk is not specific to international students and the recruitment of UK students also operates within this context”
Responding to the report, Charley Robinson, head of global mobility policy at Universities UK International, said that funding is a “complex picture and international fees are just one part of that”.
“UK universities are well placed to evaluate both opportunities and risks and put in place mitigations around recruitment.
“Although the steady shift away from government funding for teaching, towards a fee-based income model may create less certainty for universities, this risk is not specific to international students and the recruitment of UK students also operates within this context,” Robinson declared.
The committee warned that student satisfaction is at risk as a result of the financial pressures on universities, as the proportion of undergraduates saying that their university offered good value for money fell from 38% in 2020 to 33% in 2021.
“The Covid-19 pandemic brought a range of challenges for the delivery of teaching and learning in universities across the world,” said Robinson.
“UK universities were very quick to adapt and respond to the challenges, but the temporary loss of in-person teaching was felt by many students.
“UK universities will continue to innovate their offer, including careers and employability support, to provide every student with the very best experience.”
In its conclusions, the committee also said that it was “not convinced that the OfS has made sufficient progress in getting a grip” on the challenges universities are facing, adding that the OfS lacked the information it needs to spot “vulnerable” institutions.
The report set out six recommendations to address the issues, including that the Department for Education and OfS confirm what action they are taking to improve student satisfaction.
Susan Lapworth, interim chief executive of the OfS, said that the regulator will “carefully consider its recommendations”.
The news coincides with the launch of a new international student charter by UKCISA this week, an organisation representing international students in the UK, which aims to create a “world-class” student experience.
