The latest report from the Office for Students (OfS) paints a stark picture of mounting financial pressures across the higher education sector.
The analysis suggests that 43% of institutions now forecast a deficit for 2024/25, in contrast with optimistic projections made by institutions that had looked to an improvement in financial performance for the year.
The key driver is lower-than-expected international student recruitment, according to Philippa Pickford, director of regulation at the OfS.
“Our independent analysis, drawn from data institutions have submitted, once again starkly sets out the challenges facing the sector. The sector is forecasting a third consecutive year of decline in financial performance, with more than four in ten institutions expecting a deficit this year,” she said.
“We remain concerned that predictions of future growth are often based on ambitious student recruitment that cannot be achieved for every institution. Our analysis shows that if the number of student entrants is lower than forecast in the coming years, the sector’s financial performance could continue to deteriorate, leaving more institutions facing significant financial challenges,” said Pickford.
We remain concerned that predictions of future growth are often based on ambitious student recruitment that cannot be achieved for every institution
Philippa Pickford, Office for Students
Total forecasts continue to predict growth of 26% in UK student entrants and 19.5% in international student entrants between 2023/24 and 2027/28. However, in its report, the OfS said that “at an aggregate level, providers’ forecasts for recruitment growth continue to be too ambitious”.
Speaking to The PIE News on the topic, David Pilsbury, secretary to the International Higher Education Commission (IHEC), said that university target setting is, and has been for many years, “disconnected from reality”.
“There are not enough people that really know what their recruitment potential really is and how to deliver it, not enough people who push back on finance directors and university executive groups that see overseas recruitment as a tap that can simply be turned on to fill the funding gap, and not enough people developing the compelling business cases that put in place the infrastructure necessary to deliver outcomes,” he said.
IHEC recently released a landmark report urging action across several areas of UK higher education, including international student recruitment.
Pilsbury described the need to build “coalitions of the willing” between universities and with private providers – of data, admissions services, recruitment and beyond – to drive innovation, execute new models and establish different outcomes for the UK sector. The IHEC report warned that “failing to secure the future of international higher education in the UK would be an act of national self-harm”.
Data for 2023/24 from the UK’s Higher Education Statistics Agency (HESA) reflects the uncertain environment for international students lately, caused by tightened dependant rules, uncertainty about the UK’s Graduate Route and unwelcoming messaging from the previous Conservative government.
Total international student enrolment in the UK fell from 760,000 in 2022/23 to 730,000 last year. Currency devaluations in markets such as Nigeria and Ghana contributed to the decline, with Nigerian student levels dropping most dramatically by 23%.
Pickford does not expect to see multiple university closures in the short-term, but said that the “medium-term pressures are significant, complex and ongoing”.
“Many institutions are working hard to reduce costs. This often requires taking difficult decisions, but doing so now will help secure institutions’ financial health for the long term. This work should continue to be done in a way that maintains course quality and ensures effective support for students,” she said.
“Universities and colleges should also continue to explore opportunities for growth to achieve long-term sustainability. But some superficially attractive options, such as rapid growth in subcontractual partnerships, require caution,” Pickford warned.
Against a challenging operating environment, the OfS said it welcomes the work of Universities UK’s taskforce on efficiency and transformation.
The taskforce was announced earlier this year and was set up to drive efficiency and cost-saving across universities in England through collaborative solutions, including the exploration of mergers and acquisitions.
The report comes as UK stakeholders brace for the government’s imminent immigration white paper which is expected to include restrictions on visas from some countries and also changes to the Graduate Route.
