OfS report hammers home universities’ finance woes

OfS forecasts present a stark warning for England’s higher education institutions, urging them to take immediate action and abandon reliance on overly optimistic projections.

It is predicted that 72% of higher education providers in England could be in deficit by 2025-26, and 40% would have fewer than 30 days’ liquidity.

The OfS has released its latest modelling which points to a significant decrease in overall international student recruitment, with 16% fewer applications for visas in 2024 than in 2023.

The research indicates a significant drop in the number of international students from major sending countries, with some experiencing declines of over 40% in student numbers when comparing 2023-34 figures to that of 2022-23.

The largest declines reported are in the number of CAS issued to Indian and Nigerian students, down 28,585 (20.4%) and 25,897 (44.6 %) respectively.

Earlier this year, the OfS warned against overly optimistic recruitment forecasts. The latest report now underscores that “many more providers than anticipated will face financial challenges in the coming years”.

It estimates a net income reduction for the sector of £3,445 million and a a sector-level deficit of -£1,636 million by 2025-26, unless mitigating actions are taken.

Susan Lapworth, chief executive of the OfS, commented: “A competitive recruitment market for UK students means some universities will lose out and will need to update their plans. And all institutions will be alive to the impact of a sharp reduction in visa applications for international students.

“We continue to see significant variation across the sector. In our model, larger research-intensive and teaching-intensive universities appear to be, in aggregate, in better financial shape than other types of institutions. Medium- and smaller-sized institutions, along with specialist providers, are more likely to be affected by financial challenges in the years ahead.”

“Our modelling estimates the financial challenge ahead for providers and it does not conclude that significant numbers of universities will close in the short term. But that does not mean that institutions can rely on student recruitment rebounding in the coming years,” said Lapworth.

“Many universities have already taken steps to secure their long-term sustainability. For those that have not, the time to do so is now. That is increasingly likely to involve bold and transformative action to reshape institutions for the future – while continuing to deliver for the students of today and tomorrow.”

Universities UK chief executive Vivienne Stern said the financial challenges presented are “a source of serious concern”.

“Universities in all four nations of the UK are in an extremely difficult position,” she highlighted.

“This country needs its universities to be firing on all cylinders if we are going to get the economy growing and improve public services.”

This country needs its universities to be firing on all cylinders if we are going to get the economy growing and improve public services
_{Vivienne Stern, UUK}

Russell Group chief executive, Tim Bradshaw, said that Russell Group institutions have been taking mitigating action and working hard to implement efficiencies.

“The OfS report is based on modelling and indicates what could happen without the sort of mitigations that are already being implemented,” he said.

“While the report clearly shows the number of institutions that could be at risk if they aren’t able to deliver on their plans for change, a wider concern is what this might mean for the government’s ambitions for opportunity and economic growth.”

According to Bradshaw, the government’s announcement of a small tuition fee uplift in England from 2025-26 is a “good start”, but serious consideration must be given to securing a long-term funding and policy landscape that supports institutions to be financially sustainable.

Rosalind Gill, head of policy and engagement at the National Centre for Universities and Business said the latest report “hammers home the scale of the crisis faced by our nation’s world leading institutions”.

Gill said increasing employer National Insurance contributions has made the situation “more challenging”, significantly raising staffing costs for universities by £372 million a year.

Gill continued: “Although vital, this issue isn’t just about universities – it’s about the prosperity of the UK as a whole. The consequences of closures or scaled-back activities would ripple across industry, impacting businesses that rely on graduate talent and cutting-edge research.”