In a briefing paper, the group representing 24 institutions says UK tuition fees and government grants are not sufficient to allow them to continue “educating the skilled workforce of the future and producing world-class research and innovation”.
Analysis shows that the amount UK universities have had to invest to subsidise their research activities has risen from £2.9bn in 2014/15 to £5bn in 2021/22.
In 2022/23 English universities on average supplemented the cost of educating each UK undergraduate student by £2,500 per year, with all subjects now making a loss on average, it added.
The paper notes salaries, maintenance and running costs, IT and digital services, support services and regulation, and scholarships and bursaries as five areas of spending that are “essential to high-quality education”.
The teaching of international students is the primary surplus-making activity for universities to subsidise their education and research, it said, adding that “universities cannot meet the rising level of subsidy required simply by reducing costs in education without impacting on the quality”.
Increasing efficiencies and other income sources are unlikely to cover deficits without radical business model changes, it continued. While “increasing international student numbers is possible… there are practical limits for universities and their communities, and doing so increases organisational risk,” it said.
The cross-subsidisation with international student tuition fees is “at the core of the research-intensive university business model, meaning the financial sustainability of universities is closely linked with international student recruitment”, the paper noted.
While it allows institutions to be most agile in the short term, there “are inherent risks of increasing reliance on one, potentially volatile, income stream to support the UK’s domestic education and research activity which can be affected by other policy decisions around visas and immigration, or wider geopolitical shifts”.
“Progress in diversification is being made but competition for international students is fierce globally and delivering change is a long-term strategy that also requires support from the government,” it added.
This all means that additional investment from government is necessary, the Russell Group maintained.
“A more sustainable approach to funding higher education is therefore needed – one that can offset the impact of inflation on the unit of resource, and one that is fair and affordable for students and taxpayers, while safeguarding the pipeline of science, skills and innovation necessary for the growth and prosperity of the UK economy.”