Documents to download

Since the start of the coronavirus pandemic there have been concerns about the financial impact on universities. Much of this has focussed on the potential loss of international students, but there could also be losses in income from lower home student numbers, a drop in research work and less revenue from accommodation, catering and conferencing.

In 2018/19 the total income of the higher education sector across the UK was £40.5 billion and total expenditure was £39.1 billion – this provided a surplus of £1.4 billion or 3.4% of income. This excludes £4.9 billion of ‘costs’ due to a pension accounting adjustment.

The latest (April 2019) assessment of the sector in England by the Office for Students (OfS) found that overall the financial health was ‘reasonable’. There was, however, considerable variation between providers and some had ‘ambitious’ assumptions about growth in student numbers.

Much of the focus of the financial impact of the pandemic on university finances has been on the loss of international (non-EU) students. International students’ fees provide a large and increasing share of providers’ total income and universities gain a surplus or ‘profit’ on teaching international students. This surplus helps to fund important ‘loss making’ activities such as research. This ‘cross subsidisation’ can also provide flexibility to support STEM teaching, investment in facilities and widening participation activities

In 2018/19 fee income from non-EU students in the UK was £5.8 billion or 14.4% of the total income of all UK universities

In 2018/19 teaching of overseas students generated an estimated surplus of £1.7 billion or 43% in England and Northern Ireland combined. Research income was £3.9 billion less than cost; a deficit of (44%) of income.

In recent years home student numbers have remained static and the only growth in overall student numbers has been driven by international students. The UK higher education sector had almost 350,000 international students in 2018/19 or 14% of the 2.4 million students at UK universities. China is by far the largest source of international students with just over 120,000 in 2018/19.

On 10 April Universities UK sent a paper to the Government outlining the financial risks faced by the higher education sector and asked for a £2 billion package of support. On 4 May the Government responded to the sector’s calls for a bailout and announced a support package for universities and students. The package included temporary student numbers controls and an additional 10,000 student places – the package did not include any additional funding, but it brought forward £100 million of funding for research and £2.6 billion of tuition fee payments.

On 27 June the Government announced a support package for university research. This had two elements; £280 million in additional funding for publicly supported projects that are due to end in 2020/21 and a mixture of grants and loans to cover the majority of lost income from international students and therefore support non-publicly funded research. Alongside the package for research funding the Government also announced plans to develop a restructuring regime for institutions at risk of closure.

On 1 July the Government published its R&D Roadmap. Although not limited to universities or financial support it contained several measures which were aimed at supporting the sector including restating the commitment to increase UK spending on R&D to 2.4% by 2027 and increasing public funding for R&D to £22 billion per year by 2024/25. It announced £300 million would be brought forward to upgrade infrastructure through the World Class Labs.

On 17 August the Government removed the temporary student number controls in response to the U-turn on A-Level grades which resulted in more students receiving higher grades. This has led to concern that some less prestigious universities might see substantial drops in new students which could put them into financial difficulties. The Government has said it will provide additional funding to cover the extra teaching costs universities face from more students studying medicine, nursing, nursing STEM subjects and some other high costs subjects. It has also provided £10 million for capital spending to help some universities expand.

A recent report from the Institute for Fiscal Studies (IFS) modelled the overall long-run losses from all aspects of the pandemic at £11 billion. The report stated that the COVID-19 crisis posed a significant financial risk to the UK higher education sector and it said that 13 universities would end up with ‘negative reserves’ and would be at risk of insolvency without a bailout

This paper mostly refers to the situation in the English higher education sector, however some of the statistics used are UK wide and some aspects such as the provisions on research funding cover the whole of the UK.

Documents to download

Related posts

  • Headline student numbers have increased to new records following a short dip after to the 2012 reforms. There are however ongoing concerns about numbers outside this group where trends have not been so positive, including part-time undergraduates, some postgraduates students, overseas students from some countries, especially Nigeria and Malaysia, mature students and some disadvantaged groups. There is also considerable concern about the impact of the coronavirus pandemic and student numbers, particularly those from overseas and uncertainty about the impact of Brexit on EU student numbers.

  • Higher education underwent fundamental changes to how it was financed in England 2012. There have been ongoing smaller changes since then and prospects for much larger changes following the Review of Post-18 Education and Funding. How has this affected the balance between the broad sources of funding -the taxpayer and graduate and how has the total funding from all sources for universities changed?