UK Universities Risk Falling Into Deficit As Foreign Student Numbers Fall

A sector body warns that government rhetoric jeopardizes foreign enrollments, which support educational institutions

The Financial Times has reported that UK universities could face financial difficulties as a result of a significant drop in international enrollment, just a few weeks after legislation prohibiting foreign students from bringing their dependents or families into the nation was passed.

The head of the main lobby group for the sector has warned that a large number of UK universities could face financial deficit as a result of a sharp decline in international students following hostile rhetoric by Rishi Sunak's government.

The chief executive of Universities UK, which represents over 140 universities, Vivienne Stern, stated that immigration policies that discourage foreign students from coming to study in Britain were likely to cause a “serious overcorrection” in the sector.

“If they want to cool things down, that's one thing, but it seems to me that through a combination of rhetoric, which is off-putting, and policy changes (they have) really turned a whole bunch of people off that would otherwise have come to the UK,” Stern said.

Stern's appeal coincided with reports that some prestigious universities, such as York, a part of the prestigious Russell Group, were being pressured to slacken their admission standards in order to keep the influx of international students.

“The government needs to be very careful: we could end up with, from a policy point of view, what I would consider a serious overcorrection,” she added.

Due to the effective ten-year freeze on the £9,250 domestic tuition fee, UK universities are now almost entirely dependent on non-EU students for funding; in fact, non-EU student fees make up nearly 20% of sector revenue.

Privately, universities are alerting students that enrolment from important nations like Nigeria and India may have decreased by more than a third this year as a result of a string of hostile policy actions by the government.

A senior university insider told the Financial Times that data indicating the number of international students enrolling in January 2024 was “way below the bottom end of projections for everyone” had “spooked” the sector as a whole.

Announcing changes to government policy in January, Sunak said that the policy was “delivering for the British people” by prohibiting foreign graduate students from bringing their families to the UK.

In addition, the government declared in December that it was going to review the “graduate route,” which permits foreign students to work in the UK for two years following graduation, and that it was going to crack down on “low-value courses,” despite the fact that only 3% of them do not meet the requirements set forth by the regulator.

According to data from Enroly, a website that one in three international students use to manage their university enrollment, deposit payments were 37% lower than they were the previous year.

PwC consultants conducted new analysis for UUK and discovered that the sector was facing a perfect storm due to a combination of declining numbers of international students, frozen tuition fees, rising staff wage bills, and a softening of UK student numbers.

As Stern put it, “you take those things together, and you've got a big problem,” alerting the government to the danger to an industry that brings in £71 billion annually for the UK economy.

Based on the financial returns for the years 2021–22 for seventy-one UUK members in England and Northern Ireland, PwC conducted an analysis that revealed roughly forty percent of them are predicted to be in deficit in 2023–24 and 19% in 2025–26.

Nonetheless, Paul Kett, a former senior Department of Education official who currently provides education advice to PwC, stated that the figures represented highly optimistic assumptions about spending and income growth in light of the current policy climate.

According to a PwC analysis, the percentage of universities in financial deficit would increase from 19% to 27% if the growth in international enrollment stagnated in the 2024–2025 academic year. However, if enrollment started to decline between 13 and 18%, then 4/5 of universities would be in financial deficit.

Conversely, the ledger indicated that a ten percent fee increase for UK undergraduates in 2024–2025 would reduce the percentage of universities in deficit from 19% to 7%.

The report said the effects of declining international enrolments could be compounded by other negative shocks, such as a rise in spending growth or a fall in domestic student numbers. It issued a warning that increasing financial strain might push colleges to reduce funding and postpone investments, which would lower student quality.

According to Stern, three measures were required to stabilize the industry: raising tuition to keep up with inflation, expanding government funding for education, and stabilizing the global market by reducing negative discourse and dispelling doubts about the graduate program.

“You can take these individual scenarios that PwC looked at, and think that any one of them could tip a large number of institutions into a very difficult position, but the problem is that lots of those things are happening at once,” she said.

Robert Halfon, higher education minister, said: “We are fully focused on striking the right balance between acting decisively to tackle net migration, which we are clear is far too high, and attracting the brightest students to study at our universities,” he added.