Increased competition for students, falling numbers of 18-year-olds and tightened immigration rules impacting the number of international students applying, are all contributing to increased financial pressure on UK universities.
In addition, the removal of the cap on the number of students a university can recruit has opened a new, aggressive market whereby more institutions are lowering entry requirements, according to university admissions service UCAS.
These factors are having an immediate financial impact on some
universities, who are directly losing income as a result of lower
yearly student intakes.1
Revenue from international students is a critical source of
additional income for many institutions and has funded several
expansions within the sector. Enrolments have plateaued since 2012
when the visa rules were tightened, and again in recent years with
the uncertainty caused by Brexit, which has added to the
woe.2
Contributing to this financial shortfall are a number of
internal financial pressures in the sector, not least rising staff
costs, including pensions and the apprenticeship levy.
International credit reporting agency, Moody's, is reporting
that many universities have been investing in new facilities to
attract students, but doing so through borrowing, putting further
strain on the balance sheet.3
Tertiary education is not safe from collapse. The Chairman of the
Office of Students – the industry regulator – Sir
Michael Barber, has publicly stated that any institution facing
bankruptcy will not get a taxpayer-funded
bailout.4
With reports claiming that there are at least three UK universities
on the brink of bankruptcy, some serious questions need to be
asked.5 Many universities are in close proximity to one
another, leading to increased competition for students. Reputation
and value propositions are key factors in the university selection
process. Struggling universities need to act now or they may risk
going under, as the taxpayer is not going to write a cheque to bail
them out.
Now is the time to streamline course offerings or even shut them altogether and identify assets to dispose of by paying down borrowings to avoid bankruptcy or seeking professional help from restructuring specialists.
Sources:
1 https://www.theguardian.com/education/2018/aug/28/alevel-season-pushing-universities-towards-insolvency
2 https://www.thetimes.co.uk/article/universities-that-are-failing-to-make-their-sums-add-up-pvnv2nq00
3 https://www.thetimes.co.uk/article/universities-that-are-failing-to-make-their-sums-add-up-pvnv2nq00
4 https://www.thetimes.co.uk/article/universities-that-are-failing-to-make-their-sums-add-up-pvnv2nq00
5 https://inews.co.uk/news/education/university-bankruptcy-reliant-on-loans/
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