Some of the universities that today’s happy students will be aiming to attend from the autumn are facing huge financial pressures. Adam McCulloch investigates a sector that could well be on the cusp of contraction – with job losses and closed departments ahead.
Many of the A-level students celebrating their A* and A results will be looking forward to going to university this autumn. And although the trends show that employers are increasingly valuing soft skills over academic qualifications and students are being encouraged to take apprenticeships – a more cost-effective path to a career – university remains the preferred choice for many.
However, dark clouds are gathering over the UK’s university sector. One only needs to look at the “UK HE shrinking” website hosted by Queen Mary, University of London, to gain a picture of myriad compulsory redundancies, “mutually agreed release schemes”, axed departments and terminated courses, all being implemented to rein in costs.
The principal reasons behind the contraction are the long-term impact of suppressed tuition fees, and, more recently, changes to visa regulations for the overseas students who generate so much of the sector’s revenue.
Tuition fees contributed almost £27bn to higher education in 2022-23 and are the largest single source of income in higher education – more than the total from grants, research funding and other income combined. But since 2017, fees for domestic students have been capped at £9,250 a year in England. In fact they have only risen once since they were tripled to £9,000 by the coalition government in 2012. Given inflation levels after 2017, the cap means that fees have fallen by 30% in real terms.
A-levels
2024 A-level results are best since 2010
A-level results 2024: employers say soft skills are of more value
A-level results 2023: Employers less likely to require a degree
With UK students no longer covering the cost of their education, this situation is considered unsustainable in the sector.
The financial difficulties then became the “perfect storm” earlier this year when government action to reduce immigration took effect.
From January 2024 international students were forbidden from bringing family members on all but postgraduate research courses and courses with government-funded scholarships.
The need for action was clear: in the year ending September 2023, 152,980 visas were issued to dependants of students, a more than 930% rise from the 14,839 in the year ending September 2019.
But over the past five years, the sector has become heavily reliant on income from overseas students. They pay between £11,500 and £33,000 a year for their courses – and such students make up to about 26% of the student role contributing about 40% of the fees income at nearly £12bn.
Income from EU students has fallen by 25% post-Brexit but this has been more than offset in recent years by income from students from India, China and Nigeria, the three leading sources of foreign students.
The new rule on dependents has already seen a fall in monthly visa applications. Recent Home Office figures show sponsored study main applicants fell by 16% or 30,300 in the first seven months of 2024, compared with the same period last year. Meanwhile, as expected, sponsored study dependent visa applications are down 81% or 55,000 in the first seven months of 2024, compared with the same period last year.
Former Conservative government home secretary James Cleverly last year also announced a review of the so-called graduate route that allows students to work for two years post-study, and increased the salary threshold for spouses eventually to £29,000. The Labour government has committed to not altering these measures as it seeks to build the skills of the existing population in the UK.
HSBC, KPMG and Deloitte were among firms who pulled job offers to overseas graduates from UK universities after the rule changes were implemented in April.
This year has seen a shift away from the policy presumption that attracting international students without limit is immune from any trade-offs and tensions” – Jonathan Thomas, Social Market Foundation
The effect that the work-related measures may have was described by Sanam Arora, founder and chairperson of the National Indian Students and Alumni Union UK. She told University World News: “70% of Indian students have told us that it is critical for them to be able to gain work experience in the country they study in after completing studies.”
The regulator, the Office for Students, calculates that foreign student applications will fall by almost 175,000, from almost 760,000 in 2022-23 to under 590,000 this year.
It ought to be borne in mind, however, that numbers were similarly low before the pandemic, when overseas fees income was around £3bn lower. It is also the case that fast-growing numbers of international students after the pandemic led to huge pressures and was itself unsustainable.
As think tank the Social Market Foundation pointed out in June, the same period since 2020 that has seen a dramatic expansion in international student numbers has seen a decline in student housing provided by local landlords and in the number of new beds in purpose-built student accommodation, from an average of 30,000 a year between 2010-20 to just 8,760 in 2023/24.
Jonathan Thomas, senior fellow at Social Market Foundation, wrote: “This year has seen a shift – not only in the UK but also in the major competitor markets for international students of Canada and Australia – away from the policy presumption that attracting international students without limit is immune from any trade-offs and tensions. This shift is a good thing, as it provides the UK with an opportunity to acknowledge and address them, rebuilding slipping public confidence and maintaining public consent to the UK’s continued openness to international students.”
The shift may be a “good thing” in the long term but for now more than a fifth of universities (weighted by income) had an in-year deficit in 2022/23, according to the Institute for Fiscal Studies. This compares to a 10th of providers in the previous year, and is higher than had been typical before the pandemic.
As the race to attract students domestically intensifies, it could well be a large number of academics and administrative staff who will pay for the sector’s fluctuations – with their jobs.
Sign up to our weekly round-up of HR news and guidance
Receive the Personnel Today Direct e-newsletter every Wednesday
Latest HR job opportunities on Personnel Today
Browse more human resources jobs
