Universities in England have experienced a fall in income for the third year in a row, according to the higher education regulator, as it warned that declining international student numbers would translate into more cuts on campuses.
The Office for Students’ (OfS)annual financial health checkfound that many universities were trying to repair budget deficits by slashing building and maintenance spending as well as cutting courses and staff, with the sector expected to sell off more than £400m worth of land and property this year.
“The position is largely driven by a failure to recruit the anticipated levels of non-UK students … recruitment levels for these students for 2024-25 are now projected to be about 21% lower than projected last year,” said Philippa Pickford, the OfS’s director of regulation.
“What that means is the financial challenges in the sector remain stark. We’re seeing declines in the level of surpluses and liquidity, with nearly half of institutions forecast to be in deficit next year.”
Universities have relied on international students paying lucrative fees to make up for deficits from teaching UK students, whose tuition fees have been eroded by inflation. But recent immigration and visa changes have provoked a sharp fall in international recruitment since 2023, with the government expected to tighten restrictions further.
Jo Grady, the general secretary of the University and College Union, said the report confirmed that universities remained under severe financial stress, with 10,000 jobs disappearing from the sector.
“The Home Office must now think again and pull any further attacks on international students from its immigration white paper. If Labour instead chooses to act like Reform-lite and erect more barriers to those wanting to study here, there is a danger universities could go under,” Grady said.
A new poll by More in Common for University College London found that 51% of British voters think international students staying to work after studying is a good thing for the UK, including 33% of those who voted for Reform in 2024.
The OfS’s regulators “don’t expect to see multiple university closures in the short-term”, but Pickford warned that universities “will need to go further” in making changes to improve their long-term position.
Pickford suggested that prospective students could look at universities’ published financial accounts to guide their decisions if they were concerned.
“The majority of university students would never have to worry about this and to date no student has been significantly impacted by a university failure. The risks of this happening are still low – this is really about sending messages to universities to take the action they need to take now to avoid getting into that position in the future,” Pickford said.
However, the OfS said it was working closely with a small number of institutions where they are “concerned about their financial viability”, and talking to the government about protecting students in the event of closures.
Under one scenario, the OfS forecasts that “market competition” could lead to two-thirds of universities being in deficit by 2027-28, as more prestigious institutions replace shrinking numbers of international students by increasing their recruitment of domestic students.
Bridget Phillipson, the education secretary, said the figures supported the government’s decision to raise domestic tuition fees, with further moves coming in a white paper out later this summer.
“I asked the OfS to refocus their efforts on monitoring financial sustainability last year. Further reforms are needed to fix the foundations of higher education, and universities must do more to make their finances work,” Phillipson said.