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A report set to be published on Friday has revealed that despite increases in tuition fees, almost three quarters of universities in England will be facing financial problems next year. The Office for Students predicts that over a third of universities are likely to have serious cash flow problems. The regulator’s chairman, Sir David Behan, called for radical change in response, warning that university mergers and course closures might be needed for financial stability. The government is currently considering significant long-term funding and reform for universities.
An analysis undertaken by the Office for Students shows that universities are in a worse financial state than was previously anticipated. While fees are set to rise to £9,535 per year for current and existing students on full-time degrees in autumn 2025, it is clear that the sector is struggling to recruit enough UK and international students to counteract the problems faced. The regulator initially predicted that 40% of universities would have a financial deficit by 2023-24, yet now anticipates a figure of 72% by 2025-26. This could lead to institutions using overdrafts or financial reserves and severely limit the amount of cash available for them to cover bills like salaries.
Sir David Behan of the Office for Students has suggested that universities should take radical action and should consider changing their offering. Universities should look closely at the length and range of courses on offer and explore how to increase degree apprenticeships since tuition fees for these courses are covered mainly by the levy on larger employers. As apprentices work while they study, students end up with less debt. Sir David suggests that universities should collaborate more and focus on reducing similar courses, particularly where institutions are located in the same city or region.
As per the report, financial pressure on universities resulting from shortfalls in student numbers could result in highly visible changes, such as universities moving their focus to a smaller set of courses which they can recruit well for. The heat is now mounting on universities to reduce costs, with both ministers and regulators focusing their scrutiny on how institutions spend money. Despite being a tiny fraction of the spending of universities with a turnover of £500m or more, there remains an ongoing debate around the pay of vice chancellors
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