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Almost half of UK higher education providers expect to report a deficit in 2024-25 after being weaker than expected international student recruitment, sector regulators say.
According to the Students’ Annual Report on Financial Sustainability in Higher Education, the number of institutions projecting deficits in 2024-25 has increased from 29.6% to 45.2%.
The university has faced a third consecutive year of decline in financial performance and needs “critical reforms and efficiency” to restore sustainability in the sector, regulators said Thursday.
The data is a move that threatens to further destabilize the higher education sector by undermining the international competitiveness of UK universities as the government considers overhauling graduate visa routes to reduce immigration.
“We need to reaffirm our commitment to the international student and graduate school route,” said Jamie Arrowsmith, director of UK International University.
He added that the government’s whitepaper on immigration is “important” to protect the UK’s leading research position, and that protecting graduate routes is “essential” to the stability of higher education.
According to OFS, overseas student recruitment in 2023-24 was 15.5% lower than expected. This decline is expected to continue in the current academic year, with participants projected to be 21% below previous forecasts.
The agency’s outlook was worsening, but it maintained its “optimistic” and “ambitious” forecast of the recovery, predicting that the number of overseas entrants would grow by nearly 20% by 2027-28.
“We’re excited to announce that we’re a sought-after exploring the world,” said Philippa Pickford, Director of Regulation at OFS. “We are concerned that forecasts for future growth are often based on ambitious student recruitment that cannot be achieved at all institutions.
The sector faced “critical, complicated and continuous” medium-term pressures, but regulators didn’t expect to be misreading the closure of several universities, she said.
There is evidence that providers are taking steps to address financial risk through course streamlining and redundancy programs, but OFS warned that ongoing work is needed to “build resilience.”
Financial returns from this sector showed an increase in total spending between 2023 and 24 due to the impact of inflationary pressures and the introduction of retirement schemes and other cost-cutting initiatives.
Neil Smyth, partner at Mills and Reeve, advises the university on restructuring and bankruptcy, but said the sector “urgently” needs financial support from the government to stabilize providers and restore stakeholder confidence.
“Providers have been short on tuition fee growth over the past decade, coupled with increased inflation and increased funding costs,” he added.
“Last year’s budget saw an increase in taxation that denied the profits of a small increase in future tuition fees.”
