Four in 10 universities face financial challenges

More than four in 10 universities in England are expecting to be in a financial deficit by this summer, according to new report from the Office for Students (OfS).

The OfS, which regulates higher education providers, said universities were closing courses and selling buildings to cut costs, but "significant reform and efficiencies" were needed to turn the tide.

It said a drop in international students coming to the UK was the main reason for the worsening financial position.

Universities UK (UUK), which represents 141 institutions, said the report was "deeply sobering".

The report found that 117 of 270 higher education institutions (43%) registered with the OfS expected to be in deficit by July - despite course closures, job losses and selling off assets.

This third consecutive year of worsening finances was mainly driven by a fall in international student numbers, it said, particularly following visa changes in January 2024.

The number of international students was almost 16% lower last year than previously expected, according to the report.

Universities have become increasingly reliant on higher fees from international students in recent years, as tuition fees from UK students have not kept up with inflation.

Their financial plans predict that more than half of the growth in their income up to 2028 will come from international students - but the OfS warned that this was optimistic.

The OfS said it was working with a small number of institutions where it had particular concerns about financial viability.

Philippa Pickford, director of regulation at the OfS, said no medium or big institution was close to the brink and it was working with the government to draw up a failure regime.

In a briefing with journalists, she said the OfS was working with a small number of institutions where it had particular concerns about financial viability.

She added that any student going to university this autumn should expect the course to be delivered as advertised.

Vivienne Stern, chief executive of UUK, said the report was "deeply sobering" but not surprising given frozen domestic tuition fees, visa changes and "a longstanding failure of research grants to cover costs".

She said universities were doing "everything they can" to manage costs and that a UUK sector-wide taskforce would "unlock greater efficiencies".

But she added: "The scale of the challenge means none of this will be enough without government on the pitch too."

A recent snapshot of the financial decisions of 60 of the 141 institutions in UUK found almost half of those responding had closed courses, or reduced options for students in the last three years.

Industrial disputes are under way in several cities as a result.

Universities are now anxiously awaiting the government's draft plan for managing immigration, which is expected to further limit visas for students applying from Nigeria, Pakistan and Sri Lanka.

Attracting international students who pay higher fees and spend money in the UK is counted as an export. The rule change in January 2024 prevented postgraduate students from bringing relatives, and has led to a drop in numbers applying.

The higher fees paid by international students have been used to prop up university finances after many years in which tuition fees for students in England have barely increased.

While fees are due to go up this autumn to £9,535 for students in England, ministers have yet to say what will happen in following years.

The government is carrying out a review of university education, including funding, which is due to report this summer.