New findings forecast a third consecutive year of decline in the sector of higher education. The Office for Students (OfS) have published its latest Financial Sustainability Report. It compiled forecasted data concerning finances and students as provided by higher education facilities. 

The OfS is the UK’s independent regulator, who “protect the interests of students” in being provided high quality experiences within higher education.  

According to the OfS, approximately 43% of institutions included within the report showed a forecasted deficit in 2024-2025. This is an improvement from last academic year, where 61% of universities were in deficit according to the Higher Education Statistical Agency (HESA).  

Universities and colleges are anticipating an improvement in financial stability, however the OfS report showed that aggregate liquidity levels are still expected to fall. In other terms, higher education providers’ income is not able to match the continuous rise in expenditure. According to the OfS this has been largely “driven by broadly flat student recruitment and increasing costs.” 

Other challenges included the “continuing decline in the real-terms value of income from UK undergraduates” as well “inflationary and economic pressures on operating, maintenance and capital costs.” 

Most education providers have been implementing strategies to decrease spending and increase income. For example through voluntary and forced redundancy programmes, reducing the number of courses and modules on offer, as well as by selling surplus assets. 

A key challenge that higher education’s finances centres around the issue of student recruitment. Many universities largely rely upon tuition fees to support costs, alongside donations and investments.  

52% of the higher education sector’s income came from tuition fees in 2023-2024, found HESA. International students’ fees account for 23% of this income. The total income of the sector for the year is over £52.3 billion. 

Philippa Pickford, Director of Regulation at the OfS, said: “We still do not expect to see multiple university closures in the short term. But the medium-term pressures are significant, complex and ongoing. While institutions are working hard to navigate this challenging situation, 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.”  

Forecasts predicted a rise in student entrants, with a 26% growth for UK students and 19.5% for international students. However, if these projections are not met then the deterioration in financial performance will continue throughout upcoming years.  

The OfS referred to these forecasts as “overly ambitious” and recommended that institutions deliver “significant reform and efficiencies” to ensure a better financial position.  

The higher education sector’s reliance on tuition fees, particularly that of international students’, could be further impacted by the government’s White Paper, which will propose significant changes to the UK’s immigration policy. 

University and College Union’s general secretary Jo Grady said: “To stand any chance of staying in power, Labour must cease trying to be Reform-light and instead begin prioritising the investment that will improve working people’s lives. The Home Office needs to stop imposing arbitrary restrictions that prevent international students and staff from coming to the UK, driving economic growth and enriching local communities. Its failure to do so will harm universities, the country and our global standing.” 

Image Credit: UEA