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Almost half of higher education providers in England expect to report a deficit in 2024-25 following weaker than anticipated international student recruitment, the sector regulator has said.
The number of institutions forecasting a deficit in 2024-25 increased from 29.6 per cent to 45.2 per cent, according to the Office for Students’ annual report on the financial sustainability of higher education.
Universities face a third consecutive year of deteriorating financial performance, necessitating “significant reform and efficiencies” to restore sustainability in the sector, the regulator said on Thursday.
The data comes as the government considers overhauling the graduate visa route in a bid to cut immigration, a move that threatens to further destabilise the higher education sector by undermining the international competitiveness of British universities.
“We need [the] government to reaffirm their commitment to international students and the graduate route,” said Jamie Arrowsmith, director of Universities UK International, which speaks for the sector.
He added that an upcoming government white paper on immigration would be “critical” for safeguarding the UK’s position as a leading study destination, adding that protecting the graduate route was “vital” for the stability of higher education.
Overseas student recruitment in 2023-24 was 15.5 per cent lower than forecast, according to the OfS. This decline is expected to continue during the current academic year, with entrant numbers predicted to be 21 per cent below previous forecasts.
Although the outlook for institutions had deteriorated they maintained “optimistic” and “ambitious” predictions about a recovery, with the number of overseas entrants forecast to grow almost 20 per cent by 2027-28.
Philippa Pickford, director of regulation at the OfS, said: “We remain concerned that predictions of future growth are often based on ambitious student recruitment that cannot be achieved for every institution,” adding that this risked leaving “more institutions facing significant financial challenges”.
The sector faced “significant, complex and ongoing” medium-term pressures but the regulator did not expect to see several university closures imminently, she said.
While there is evidence that providers are taking steps to address financial risks through course rationalisation and redundancy programmes, the OfS warned that continued work was needed to “build resilience”.
Financial returns from the sector showed aggregate expenditure increased in 2023-24, driven by inflationary pressures and the impact of introducing severance schemes and other cost-cutting initiatives.
Neil Smyth, a partner at Mills and Reeve advising universities on restructuring and insolvency, said the sector “urgently” required financial support from the government to stabilise providers and restore stakeholder confidence.
“Providers have seen a lack of increase in tuition fees over the past decade, coupled with increased inflation and increased financing costs,” he added.
“Last year’s budget has seen an increase in taxation that will negate any benefit from the small increase in future tuition fees.”
